This blog discusses in detail about the definition, types, features, legal consequences incase of non-compliance to the agreements that are used by the businesses around the world.
Understanding Shareholder Contracts: This blog discusses about the same in detail and explains the features, key considerations and legal consequences that one might face when not adhered to the agreement. There are three types of agreements that are available to a shareholder which are as follows.
The three types are as follows,
- Voting rights Type: This type of Contract gives certain shareholders the right to vote on matters that require shareholder approval, such as the sale of the company or the issuance of new ones.
- Get-Give Type: This type sets forth the procedures for how holders of portions can interact with their ownings in the company. It can also include provisions for what will happen to a shareholder’s shares if they die or become incapacitated.
- Dispute resolution Type: This type of Contract sets forth the procedures for how shareholders will resolve disputes among themselves. It can include provisions for mediation or arbitration.
Features
Many different types of agreements can be used when shareholders are involved in a business. While most of these agreements serve similar purposes, there are some key differences that should be considered. Here is a look at some of the common features and the differences between them.
One of the most important aspects of any agreement is defining the company’s ownership structure. This includes specifying how many portions each shareholder in a shareholder agreement owns and what rights come with those portions.
For example, some portions may have voting rights while others may not. It is also important to note that the ownership structure can change over time, so the agreement should include provisions for this. Another key aspect of these types of agreements is outlining the roles and responsibilities. This includes specifying who will make decisions about the company and how those decisions will be made. It is also important to include provisions for resolving disagreements among shareholders.
Key Considerations
There are a few key considerations to keep in mind regarding how to structure the agreement.
Here are a few things to keep in mind:
- Make sure the agreement is clear and concise.
- Be sure to identify the parties involved and their respective roles and responsibilities.
- Delineate the rights and obligations of each party.
- Put together a detailed plan for how portions will be transferred in the event of death or disability.
- Establish clear procedures for how disputes will be resolved.
Legal Effects of Noncompliance
Suppose a violation to the provisions of an agreement occurs, several legal consequences could result. These include:
- The aggrieved party may be able to bring legal action for breach of contract against the offending party.
- The court may order specific performance of the terms of the agreement, meaning that the party in breach would be required to comply with its obligations under the agreement.
- The court may award damages to the aggrieved party.
- If the breach is serious enough, it could result in the dissolution of the company.
Conclusion – Understanding Shareholder Contracts
The above-mentioned agreements are different from one another. Shareholders’ agreements govern the relationship between shareholders, while the others govern the ones that they specifically try to address. Most of these are important documents, and they serve very different purposes. Be sure to consult with an experienced attorney to ensure you have the right agreement for your needs.
Also, Read:
