Free shareholder agreement checklist

  • What proportions will the shareholders own the shares ?
  • Are different classes of shares with different rights necessary ?
  • Do you agree pre-emption rights for shareholders ?
  • Minority shareholder protection
  • Should the directors be able to block the transfer of shares ?
  • Are transfers of shares to be allowed between existing shareholders or to family members or to family trusts or to associated companies?
  • How regularly should directors meetings take place?
  • Where there may be a deadlock at board level will the chairman be given the casting vote ?
  • Will directors be employees and if so, will they need director’s service agreements
  • What is the policy on payment of dividends
  • Agreement regarding working capital, long term finance and loan capital
  • Will shareholders guarantee any company borrowings if required by banks or others ?
  • In what circumstances is the issue of new shares or introduction of new shareholders allowed ?
  • authority will be granted to or restricted for entering into major contracts, charging assets of the company or lending or giving security or financial accommodation ?
  • policies on appointments and dismissals of directors and remuneration for directors
  • the company’s bank mandate arrangements
  • Are non-competition covenants required for either directors or shareholders or both on departure ?
  • Are confidentiality clauses needed from directors or shareholders or both ?
  • clarification of time which will need to be devoted to the business by directors or shareholders
  • rights of shareholders to have access to management information and inspect books of the company at its premises.
  • events of breach of the agreement and consequences, such as physical incapacity or bankruptcy or in circumstances where a shareholder ceases to be a director/employee
  • agreements as to what happens on the death of a shareholder.
  • an agreed basis for valuing shares on departure of a shareholder
  • Should owners be required to have life, keyman and/or critical illness insurance ?
  • Deadlock provisions where there isĀ  a 50/50 ownership situation.
  • Consideration of “drag along” rights for shareholders who have a controlling interest in the company the ability to force minority shareholders to join into a sale. Similarly “tag along” rights would enable shareholders to join with other shareholders who intend to sell to a third party.

 

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