Shareholders Agreement Template
A Shareholders Agreement is an agreement between the shareholders of a certain corporation (the “Corporation”) which sets out the Shareholders’ rights and obligations.
Shareholder: each individual, entity or organization that owns shares of the Corporation.
Information needed to complete this Shareholder Agreement Template
You will need to collect the following information before completing the Agreement:
- Date and place where the Corporation was incorporated;
- Name and address of each Shareholder as well as the name of their representatives (if applicable);
- Number of total share classes of the Corporation (ex: class A, B, C, etc.): you can usually find this information in the Corporation’s By-Laws;
- Number of share classes which are common shares and preferred shares: you can also find this information in the By-Law’s;
- Number and class of shares held by each Shareholder:
a. If the Corporation has not yet been incorporated or has been recently: the Shareholders have to agree on this
b. If the Corporation has been incorporated for a while: you can find this information in the Corporation’s minute book
- Number of Directors each Shareholder shall be entitled to nominate; and
- Names of Directors, President, Secretary, and Treasurer.
When to use this Shareholders Agreement Template?
At any time the Shareholders decide upon. However, it is important that most or all of the Shareholders sign this Agreement.
Specifications of this Shareholders AgreementTemplate
This agreement provides a number of rights and obligations that the Shareholders can choose to include:
- Multiple signature requirements for checks, bank drafts and bills of exchange above a certain amount;
- Pre-emptive right: when new shares are issued by the Corporation, each Shareholder will have the right to buy a part of these new shares in proportion to the number of shares he/she already holds. By choosing to add this right, Shareholders will benefit from a protection from any potential dilution of the percentage of shares they hold within the Corporation;
- Buy/sell provision: this provision sets out the process for a Shareholder who wishes to buy the other Shareholders’ shares;
- Right of first refusal: by including this right, when a Shareholder wishes to sell his/her shares to a third party, he has to first offer them to the other Shareholders’. This right protects the Shareholders from having an undesirable third party as a fellow Shareholder;
- Additional Funds and Cash Call: this provision would be applicable in a situation when the Corporation requires additional funds to operate. The Corporation can ask the Shareholders to advance the funds. If a certain Shareholder is unable to pay, other Shareholders can pay on his/her behalf as a loan;
- Non-competition and non-solicitation provision: by including this provision, Shareholders cannot divulge confidential information to 3rd parties, compete with the Corporation or solicit clients, employees or suppliers away from the Corporation. This provision is applicable for the period where a person or entity holds the Corporation’s shares and for a certain amount of time thereafter;
- Rights upon default: if a Shareholder defaults (by for example filing for bankruptcy), this provision allows the other Shareholders to buy his/her shares;
- Provision on disability: if a Shareholder is unable to perform his/her duties for a certain amount of time, his/her shares can be sold back to the Corporation under this provision;
- Provision of death: if a Shareholder dies, this provision stipulates that the Corporation can buy back his/her shares; and
- Loan claims: by including this right, a Shareholder to whom the Corporation owes an outstanding loan will be paid ahead of any payment of dividend on the shares.
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