The Benefits of a Shareholders Agreement

The shareholder agreement also defines the roles, responsibilities and functions of each of the shareholders therefore preventing a future dispute. It can also promote a harmonious relationship between the shareholders. Additional rights and restrictions on some of the authorities with shareholders that have less shares can also be decided with the agreement. Once the agreement has been decided, it becomes final when it becomes a written document in a form of contract.

Benefits of having a shareholder agreement would include the following:

· You will be able to control the ownership of the shares by authorizing the transfers in the some circumstances like death, mental disability or bankruptcy.

· You can decide on how the resolution of problems will go.

· You can provide protection to shareholders that own less than fifty percent or the minority holders of the company.

· You can control the removal and hiring or employing the directors and the terms of their employment.

· The financial aspect of the company can also be decided pre-hand.

· The rules on payments and/or dividends as well as the other benefits of the directors can be set out clearly.

· You can also enforce some restrictions regarding the company’s rival.

· The shareholders can also be prevented from poaching the staffs or the customers.

Not all of these benefits can actually be achieved by all the shareholders; this will depend in your position in the shares. There are no legal requirements when you wish to enter a shareholders agreement but the contents of the agreement must be in line with governing laws that have already been established. The governing laws might also vary according to your location.

A shareholder agreement can be made anytime -whenever the shareholders believe that it becomes necessary for them to do. But we must remember that the benefits will be available for the shareholders to have when they already decide to enter into an agreement. Also, problems or conflicts might arise within the shareholders anytime. So if a shareholders agreement is already agreed on before those conflicts arise, it would be much better.