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What is a Shareholder Agreement?

A shareholder agreement is an agreement amongst the shareholders or members of a company. In practical effect, it is analogous to a contract between the shareholders of a corporation. It is a formal contract that sets out and explains the structure and nature of their relationship to the corporation and to one another. Corporations find this type of agreement to be highly valuable because it helps to create a strong foundation for the corporation as a whole.

Every shareholder wants to maximize the value of their investment, so why not use this shareholder agreement to supplement the Articles of Association to prevent conflict and protect minority shareholders. This direct shareholders’ agreement, used between some or all of your company’s shareholders, may be the best way to ensure stability and continuity.

Unlike the articles of the company, the shareholder’s agreement is confidential. It includes major issues like company administration, company officers, new share issues, day-to-day management, decision making, and leave to shareholders. Shareholders should consider enforcing the shareholders’ agreement as soon as possible after the company is formed or after the first shares are issued.

What is a Shareholder?

A shareholder is an individual or institution that legally owns one or more shares of the share capital of a public or private corporation. Shareholders may be referred to as members of a corporation. If the company performs well, the shareholder’s profits. If the company performs poorly, the shareholder can potentially lose money.