Does your business have a shareholders’ agreement?

A shareholders’ agreement is a legally binding contract between partners. It is a private, confidential document that should include specific terms to be effective.

The main purpose of a shareholders’ agreement is to clarify important matters that concern all shareholders, such as:

A shareholders’ agreement acts as a kind of constitution, outlining how the company operates and how many votes are required to make any decision – whether by the shareholders or the board of directors.

Why do we need a shareholders’ agreement?

For example, consider the following scenario: you are an early-stage startup with an excellent concept, and your product is in the development phase. Usually, at this stage, we think less about investing in services that are not directly related to product development, such as legal documentation. However, this is a crucial element, and neglecting it can cause multiple problems for the company. A shareholders’ agreement defines the relationship between shareholders and directly affects the protection of your product. If there is one thing you should address as soon as you bring in co-founders, it is a properly drafted shareholders’ agreement. Keep in mind that this will likely be the first document a future investor sees when you seek to raise capital.

Think of your shareholders’ agreement as an insurance policy that provides protection against unforeseen circumstances and potential conflicts in the future – whether with co-founders, investors, or directors. Of course, everyone may be on the same page now, but disputes do arise, and this is where invaluable legal frameworks matter to resolve issues.

Contact IGAL’s experienced legal team to discuss your legal needs and help you prepare a shareholders’ agreement to protect your company and business interests.