Questions for Shareholders Agreement

As a shareholder, entering into an agreement with your co-shareholders is critical in defining the rights, roles and responsibilities of each shareholder. A shareholders` agreement is a legal document that sets out the terms of the relationship between shareholders, including their rights and obligations. When drafting a shareholders` agreement, it`s important to ask the right questions. Here are some essential questions you should ask when preparing to enter into a shareholders` agreement.

1. What are the rights and responsibilities of the shareholders?

It`s important to identify the rights and responsibilities of each shareholder in the agreement. This includes decision-making power, ownership percentages, and obligations to contribute to the company`s operations and growth.

2. How will the company be managed?

It`s important to outline the structure of the management of the company and who will be responsible for decision-making. Setting out a clear management structure will help to avoid disputes and ensure that the company operates efficiently.

3. How will disputes be resolved?

Disputes between shareholders can arise, so it`s essential to have a mechanism for resolving them. A shareholders` agreement should outline the process for dispute resolution, which may include mediation, arbitration, or litigation.

4. How will shares be transferred or sold?

It`s crucial to establish a clear process for transferring or selling shares. This includes identifying who can purchase shares and at what price. Having a clear process in place can avoid disputes and ensure a smooth transition of ownership.

5. What happens in the event of a shareholder`s death or disability?

In the event of a shareholder`s death or disability, the shareholders` agreement should outline what will happen to their shares. This may include a buy-sell agreement, where the remaining shareholders buy back the shares at a pre-determined price.

6. What happens if a shareholder breaches the agreement?

It`s important to include provisions for breaches of the shareholders` agreement, including the consequences of such a breach. This may include the sale or transfer of the breaching shareholder`s shares.

7. How will profits be distributed?

The shareholders` agreement should outline how profits will be distributed among shareholders. This may include determining the percentage of profits each shareholder will receive or a formula for distributing profits based on ownership percentages.

A shareholders` agreement is a crucial document that sets out the legal relationship between shareholders. By asking the right questions and ensuring a deep understanding of the implications of each provision, shareholders can avoid disputes and protect their interests. A qualified attorney experienced in shareholder agreements can help in drafting a comprehensive agreement based on the unique needs and goals of the company and its shareholders.