When investing in a company, one of the key legal documents that shareholders need to review is the shareholders agreement. This agreement outlines the rights and responsibilities of shareholders, and defines the relationships between shareholders and the company itself.
As a professional, I have seen the importance of reviewing shareholders agreements to ensure that they are clear, concise, and legally sound. Here are some key things to look for when reviewing a shareholders agreement:
1. Ownership and share classes: The agreement should clearly define the ownership structure of the company, including how many shares are issued, who owns them, and what percentage of the company each shareholder holds. It should also outline any different classes of shares that exist and what rights and privileges are associated with them.
2. Voting rights: Shareholders agreements typically outline how voting rights are distributed among shareholders, and what percentage of votes are required for key decisions, such as electing directors or approving major transactions. It should be clear how these rights are allocated and what the thresholds are for different decisions.
3. Share transfers and restrictions: The agreement should outline the rules around transferring shares of the company, including any restrictions on who can own shares and how they can be sold or transferred. This can include provisions on pre-emption rights, which give existing shareholders the right to buy any shares that are being sold by another shareholder.
4. Dividends and distributions: Shareholders agreements might include rules on how profits are distributed among shareholders, including how dividends are paid out and what percentage of profits are retained by the company.
5. Dispute resolution: Finally, the agreement should outline how any disputes between shareholders or between shareholders and the company are resolved, including whether arbitration or litigation is used, and what the governing law is.
Overall, a well-drafted shareholders agreement is critical for both shareholders and the company itself. It can help ensure that everyone is on the same page and has a clear understanding of their rights and responsibilities. As a professional, it`s important to review these agreements carefully to ensure that they are legally sound and free of any ambiguity or confusion.