Shareholders agreements are crucial in that they are used to safeguard the interests of the shareholders of a particular entity.
Apart from setting out the obligations and rights of the shareholders, the shareholders agreements also detailprocedures and/or guidelines pertaining to the management of the entity – in this regard, shareholders need not always be directors of a company.
Shareholders agreement should always be in writing, and should be reviewed from time to time.
Due to the legal rights and obligations created thereby, shareholder’s agreements should be drafted by legal professionals.
Once the shareholders agreement is adopted by all the relevant shareholders, shareholder’s can have peace of mind knowing that:
1.. Any potential future disputes would be limited as the agreement will stipulate how certain issues are to be dealt with;
2. Should there be any loans made by a shareholder or a third party to or from the entity, the agreement will stipulate the repayment period and criteria for approval thereof – preventing unnecessary and unapproved loans;
3. Should shareholders wish to sell the shares, the agreement would detail the procedure for the selling the shares to the other shareholders and when shares can be sold to third parties;
4. The agreement will canvass each shareholder’s duties, and more importantly, powers in the company;
Needless to say, a shareholder’s agreement needs to be as comprehensible as possible to ensure that each of the shareholders rights are protected.
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