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Essential Clauses to Include in Your Unanimous Shareholders’ Agreement

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A unanimous shareholders’ agreement (USA) is a critical document that outlines the relationship between shareholders in a corporation. It helps establish rules and guidelines for decision-making, protects the interests of all parties, and can prevent disputes and disagreements. When drafting a USA, it is important to include essential clauses that cover various aspects of the shareholders’ relationship. Here are some clauses that should be included in your unanimous shareholders’ agreement:

1. Rights and Obligations of Shareholders: This clause should clearly outline the rights and obligations of all shareholders involved. It should establish the voting rights of each shareholder, including any special voting provisions or restrictions. It should also outline the obligation of shareholders to act in the best interest of the corporation and the other shareholders.

2. Transfer of Shares: This clause should address the restrictions and guidelines for the transfer of shares. It may include provisions such as rights of first refusal, tag-along rights, and drag-along rights. These provisions can protect the interests of shareholders when a shareholder wishes to sell or transfer their shares.

3. Dispute Resolution: A well-drafted USA should include a dispute resolution clause that outlines the process for resolving conflicts between shareholders. This can include mediation, arbitration, or other forms of alternative dispute resolution. Clear guidelines for resolving disputes can help prevent costly and time-consuming litigation.

4. Board of Directors: If the corporation has a board of directors, the USA should include provisions regarding the composition and election of board members. It can outline the number of directors, the process for nominating and electing directors, and any other relevant guidelines. This clause helps ensure that each shareholder has a say in the composition and management of the board.

5. Dividend Distribution: This clause establishes guidelines for the distribution of dividends to shareholders. It can include the timing and manner of distribution, as well as any restrictions or conditions that need to be met. This clause helps maintain transparency and fairness in the distribution of profits.

6. Non-Compete and Confidentiality: To protect the business interests of the corporation, it is important to include a non-compete and confidentiality clause. This clause outlines restrictions on shareholders engaging in activities that compete with the corporation or disclosing confidential information.

7. Decision-Making: This clause outlines the decision-making process within the corporation. It can address matters such as the quorum required for shareholder meetings, the process for passing resolutions, and any specific procedures for certain decisions. This clause ensures that important decisions are made with the consent and involvement of all shareholders.

8. Termination and Buyout: It is essential to include clauses that outline the process for terminating the USA and any buyout provisions. This can include triggers for termination, such as bankruptcy or the sale of the corporation, and guidelines for valuing and purchasing shares in the event of a buyout.

In conclusion, a unanimous shareholders’ agreement is a crucial document that outlines the relationship between shareholders and helps prevent disputes. When drafting a USA, it is important to include essential clauses that cover various aspects of the shareholders’ relationship. These clauses should address rights and obligations, share transfers, dispute resolution, the board of directors, dividend distribution, non-compete and confidentiality, decision-making, and termination and buyout provisions. By including these essential clauses, you can establish a clear framework for the functioning of the corporation and protect the interests of all shareholders involved.
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