Shareholder Agreement Review

A shareholders` agreement can be an effective way to define the details of the company`s activity. In terms of correct wording, a shareholders` agreement can give shareholders clarity on issues such as the roles each will play in business, the distribution of profits and costs, dispute resolution, and the inheritance rights of a deceased shareholder and remaining shareholders in the event of death or obstruction. Normally, with the shareholders, the company is a party to a shareholders` agreement, which usually contains provisions that impose obligations between each shareholder and the company, as well as between the shareholders themselves. Prohibitions of confidentiality and competition, obligations of the share buyback company in the event of the death or obstruction of a shareholder, etc. If the shares of an operating company are held by other holding companies, you may want to consider adding the contracting entities of the holding companies as parties to the shareholders` agreement. While these clauses don`t seem important when the shareholders` agreement was first conceived, be sure to check them properly – they can dramatically influence the shareholder relationship during a possible exit. It can be tax-efficient for the company to buy back shares from an outgoing shareholder. The repurchased shares are withdrawn, which increases the share of shares held by existing shareholders. The buyback is financed by distributable reserves. To protect oneself in the case of a spouse who applies for shares in accordance with the net family assets offsetting under the Family Act, a shareholder agreement may have a shareholders` agreement containing certain provisions. This could mean that shareholders` spouses must provide for the waiver of rights to real shares, the right to information that respects the company, as well as independent legal advice. As a general rule, however, the shareholders` agreement should stipulate that a shareholder`s shares are sold, refunded or transferred to another shareholder at fair value when an application or proceeding is brought by or against that shareholder under the Family Law. This ensures that the spouse receives the value of the shares in the form of money, but not the shares themselves.

In other words, the spouse gets his equivalent and the remaining shareholders of the company are not obliged to do business with their former spouse.. . . .