What should you include in your shareholder agreement?

On Behalf of | Jun 7, 2024 | Shareholder Agreements

A shareholder agreement in Georgia outlines the rights, responsibilities, and relationships between shareholders in a company. It protects the interests of all parties and provides a framework for handling various scenarios that might arise. Understanding the key elements in your shareholder agreement can help you evaluate the document better.

Shareholder details

Begin with the basic details of each shareholder, including names, contact information, and the number of shares owned. This section establishes the foundational ownership structure of the company. It should also define the roles and responsibilities of each shareholder. It includes outlining their duties within the company and any specific obligations they must fulfill. 

Voting rights

The business law in Georgia specifies the voting rights of shareholders. It can include how votes are allocated based on the number of shares and the procedures for voting on company matters. Specify which decisions require shareholder approval and the voting thresholds for different decision types.

Dividend distribution and share transfer 

Outline the company’s policy on profit distribution. Specify how and when dividends will be paid out. Mention the process for distributing dividends. Establish rules for transferring shares, including any restrictions on selling shares to outside parties. This might include the right of first refusal. 

Dispute resolution

Include a mechanism for resolving disputes between shareholders. This might involve mediation or arbitration clauses to handle disagreements without resorting to litigation, which can be costly and time-consuming.

Exit strategy

Specify the process for shareholders who wish to exit the company. This includes buyout provisions, valuation methods for shares, and terms for payment. Clearly defined exit strategies can prevent conflicts when a shareholder decides to leave.

Including these key elements in your shareholder agreement helps ensure a clear, fair, and well-structured relationship among shareholders.