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EVERYTHING YOU NEED TO KNOW ABOUT SHAREHOLDER AGREEMENTS

shareholders agreement

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What is it?

Shareholder’s agreement (usually known as “SHA”) are agreements between all or some of the members of a company. The aim of such agreements is to regulate, complete, specify or modify their internal relations and the legal or statutory relations that govern them in order to reduce conflict.

Each agreement is unique in the sense that they depend on the how the project is formed, whether there are other investors involved, the relationship the partners will have, the agreements reached to work together, the contributions they will make, the dedication they will have to the project, etc…

It is important for them to keep checking back and updating or changing the agreement.

Who’s linked to it?

The shareholders’ agreements must be signed by at least two shareholders. Although it is possible that they may also be signed by third parties to whom rights are granted or who assume obligations towards the company.

When a company is incorporated, it is necessary to make an agreement. Also, every time a new partner joins or leaves the partnership. There can be agreements involving shareholders, accelerator/incubators, mentor partners, crowdfunding, etc.

How is it?

The process of a shareholder agreement can be as simple or complicated as the shareholder´s make it to be. It needs to be thought out, talked out, and written out not only just on what each shareholder wants out of the agreement, but on regulating how to work together, identifying the founders, describing roles or functions, assessing how they will make or plan to make the distribution of equity and including a series of clauses that protect the continuity of the project.

What are the benefits?

The specific benefits of a shareholder agreement depend on the type of agreement made. Specified companies enjoy linking with one another because it allows each of them to focus on what they are good at, whilst improving more than just that aspect of the company.

In general a Shareholder´s Agreement, may benefit on aspects such as:

  • Strengthening the position of minority shareholders
  • Regulating the participation of investment partners
  • Valuing “intangible” contributions (such as know-how)
  • Determining the objectives pursued (what constitutes the interest of the partners), etc.

Who regulates them?

The partners within the shareholder agreement are expected to uphold and regulate their share of the deal. If the partners both sign the shareholder agreement, there is documented proof that can be used in a court of law if a conflict arises.

 

The use of SHA´s has been increasing in their use, which is not coincidental due to their ability to anticipate and provide solutions to problems that may arise in the life of the Company.

We at Lexidy Law Boutique are here to help you at any stage of a shareholder agreement.


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