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A shareholders’ agreement is a crucial document that sets out the rights and obligations of shareholders in a corporation. While many agreements can be created by a majority vote, a unanimous shareholders’ agreement (USA) requires the agreement of all shareholders. This comprehensive guide aims to provide essential elements to include when drafting a unanimous shareholders’ agreement.
1. Introduction and Recitals:
The agreement should start with an introduction that states the purpose and background of the agreement. This section should also include recitals that highlight the shared intentions among shareholders and the need for a unanimous agreement.
2. Definitions:
Clearly define all key terms and concepts to avoid misunderstandings. This section should cover important terms such as “shareholder,” “shares,” “voting rights,” “quorum,” and any other relevant terms specific to the corporation.
3. Shareholders’ Rights and Obligations:
Specify the rights and obligations of each shareholder. This can include matters such as the right to dividends, voting rights, share transfer restrictions, preemptive rights, and obligations to maintain confidentiality or non-compete agreements.
4. Board of Directors:
Outline the composition, nomination, and election of the board of directors. Specify the number of directors, the process for electing them, and any rights or restrictions related to board membership. A USA might stipulate that all shareholders have a right to nominate at least one director or that unanimous consent is required for certain decisions.
5. Decision-Making:
Define the decision-making process for the corporation. Specify the threshold for major decisions, such as mergers, acquisitions, or incurring significant debt. Determine if unanimous consent is required for these types of decisions or if a higher majority threshold (such as 75% or 80%) is sufficient.
6. Share Transfers:
Address share transfers and restrictions. Decide if shares can be freely transferred or if the unanimous consent of all shareholders is necessary. Include provisions that protect minority shareholders from being forced to sell their shares against their will.
7. Dispute Resolution:
Establish a mechanism to resolve disputes between shareholders. Consider including a mediation or arbitration clause to encourage amicable dispute resolution before resorting to litigation.
8. Non-competition and Confidentiality:
Include provisions that prevent shareholders, directors, or senior employees from competing with the corporation or disclosing sensitive information to outside parties. Clearly define the scope, duration, and consequences of any breach of these provisions.
9. Selling the Corporation:
Anticipate the potential sale of the corporation and define the process for evaluating and accepting offers. Determine whether unanimous consent is required for accepting a sale or if a higher majority threshold suffices.
10. Termination and Amendments:
Establish conditions for terminating the agreement and the process for amending it. Determine if unanimous consent is required to terminate or amend the agreement or if a higher majority threshold is sufficient.
11. Miscellaneous Provisions:
Include miscellaneous provisions, such as the governing law, severability, notice requirements, and force majeure clauses. These provisions help to create a comprehensive and balanced agreement that addresses various contingencies.
While this guide provides a broad overview, it is essential to consult with legal professionals experienced in corporate law to ensure the unanimous shareholders’ agreement complies with local regulations and appropriately reflects the specific needs and objectives of the shareholders.
Drafting a unanimous shareholders’ agreement is a complex task that requires careful consideration of various elements. By including these essential elements, shareholders can establish a robust framework that protects their rights, ensures effective decision-making, and promotes a harmonious relationship among all participants in the corporation.
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