Keeping Shareholders on the Same Page With a Shareholders’ Agreement
As an incorporated business there can me more than one that share in its ownership. Shareholders can also take on other responsibilities based on individual skills sets to divvy up responsibilities.
To help layout the rights and obligations, above and beyond the legal requirements set out by provincial and federal legislation is a document called a shareholders agreement. The most commonly used shareholders agreement is called the unanimous shareholders agreement (U.S.A). In general terms the legally binding USA outlines:
• corporate structures
• daily operations
• how the shareholders get paid (annually or at termination—examples death retirement)
and is prepared by lawyers (Lawyers). This important document helps shareholders understand the things they can and can not do.
One of the most important sections of a well written USA describes the procedures for the buying and selling of company shares. This section is commonly referred to as the Buy-Sell Agreement. It can however, be separate from the USA. The buy and sell agreement typically outlines provisions for transferring shares in the event of a shareholder retires or dies.
Additional provisions are added in the event the company goes bankrupt or if a shareholder goes through a divorce.
Because the buy sell agreement includes the buying and selling of share laying out the process of determining the value of the shares is important to spell out. The buy and sell agreement should be reviewed every year.
Make sure your shareholders and your support “dream team” team of trusted advisors keep your shareholders agreement up-to-date.