What is Shareholder's Agreement?
A shareholders agreement is an arrangement among the shareholders of the company. This type of agreement describes how the company should be operated and the shareholder's rights and obligations.
It includes information on the regulation of the shareholder's relationship, ownership of shares, management of the company, and privileges and protection given to shareholders. It governs the shareholder rights and obligations, transfer of shares, and regarding the finalization of the important decisions.
Benefits of shareholder's Agreement
- Shareholder's Agreement specifies all the powers & rights of a shareholder. Moreover, it also acts as a regulator of the relationship between small and large shareholders.
- Shareholders' Agreements are perfect for small and medium companies as in case of minor changes it does not require to amend the constitution every time.
Shareholder's Agreement is considered as one of the main documents for a company. It is a legal agreement between the shareholders of a company, which establishes a fair relationship between the stakeholders and govern the operation of the company.
Here are the following areas covered under Shareholder's Agreement
- Rights and obligations of the shareholders.
- Rights and obligations during transfer of shares.
- Right and obligations of the management of the company.
- Rights and obligations of the Investor.
It is an agreement which is entered into by the present stakeholders of the company, investors and the company. In shareholder's agreement business activity is defined which is proposed to be conducted by the company for which shareholders have come together. In the agreement it also includes a clause to change a business activity of the company with the consent of all the shareholders.