When you’re starting a new business, you always want to have a legally binding contract in place with your clients.
Why do I need a Shareholder Agreement?
Often business partners have an informal agreement between them regarding how the business should be run at a corporate level. A properly drafted shareholder agreement provides written evidence of the parties’ intentions and legally binding terms the parties must abide by.
Most disputes between the shareholders of a closely held corporation occur when one (or some) of the shareholders want to exit the venture.
Because the shares of a privately held corporations often have a limited secondary market, it is not uncommon for costly legal disputes to occur when one shareholder wants to sell their shares. This is one of the reasons why it is important to have a detailed shareholder agreement drafted to protect the existing and remaining shareholders including provisions such as drag-along rights and tag-along rights, rights of first refusal, veto rights, and deadlock or buy-sell provisions.