It is recommended that shareholders enter into a shareholders’ agreement in the early stages of starting a business.
Establishing respective rights early on can allow a business to operate smoothly, and by entering into an agreement at the beginning, any issues that may arise can be dealt with as prescribed in the agreement. Many shareholders make the mistake of waiting until there is a conflict to come to an agreement on rights and obligations, and at this point it is often too late.
Shareholder’s agreements are often tailored to address the specific needs of the business, and the interests and concerns of the shareholders.
Generally, this document can be used to:
- set out how the affairs of a corporation will be managed,
- set out what rights the shareholders have to share in the proceeds of the corporation, establish the respective contributions made by shareholders to the corporation and any obligations to make future contributions,
- provide ways to resolve potential conflicts between shareholders, and to
- provide protection for minority shareholders.