When starting a business with partners, one of the most important things you can do is negotiate and sign a shareholder agreement. A shareholder agreement is a legal document that outlines the rights and responsibilities of each shareholder, as well as how decisions will be made and disputes will be resolved. It is an essential tool for protecting the interests of all parties involved.
If you are considering entering into a shareholder agreement, here are some important things to discuss with your partners:
- Ownership percentages: It’s important to decide how ownership percentages will be split among shareholders. This can have a big impact on decision-making power and profits.
- Roles and responsibilities: Clearly defining each shareholder’s roles and responsibilities will help avoid conflicts down the road. This includes duties such as managing the company, hiring employees, and handling finances.
- Decision-making: How decisions will be made is a crucial component of any shareholder agreement. Will decisions require a unanimous vote or just a majority? What happens if shareholders disagree?
- Profit distribution: Profit distribution is another key issue to discuss. How will profits be distributed among shareholders? Will profits be reinvested back into the company, or will they be distributed as dividends?
- Exit strategies: It’s important to have a plan in place in case a shareholder wants to leave the business. Will they be able to sell their shares? How will the value of the shares be determined?
- Dispute resolution: No matter how well you plan, conflicts can still arise. It’s important to have a plan in place for resolving disputes, whether it’s through mediation, arbitration, or another method.
- Amendments: Finally, it’s important to discuss how the shareholder agreement can be amended. Will all shareholders need to agree to changes, or just a majority?
By discussing these important issues with your partners and working with a qualified business lawyer, you can create a shareholder agreement that protects the interests of everyone involved. To learn more about shareholder agreements and how to create one, contact Falcon Law PC at 1-877-892-7778 or info@falconlawyers.ca.
