Key Legal Insights into Effective Shareholder Agreement Creation
Oct 9 2024 0

Key Legal Insights into Effective Shareholder Agreement Creation

When you start a business, laying the groundwork for a successful and profitable future is critical. A shareholder’s agreement can be a part of that essential work. No one can tell what issues may arise once an endeavor takes off and disputes or complicated matters may come about. With a comprehensive shareholder agreement, the fundamentals and processes of how to navigate various affairs can be put in writing so that everyone is on the same page and can better navigate unpleasant circumstances if need be.

A shareholder agreement is not a requirement for doing business. However, due to the important role a shareholder agreement has and the impact it can have on smooth-functioning business operations, it is crucial that an agreement is thorough and tailored to your business. Consulting with a business attorney can be advantageous when drafting a shareholder agreement.

In California, the Los Angeles business attorneys at Leiva Law Firm can assist you with your company’s shareholder agreement.

Putting Together a Shareholder Agreement

Key Legal Insights into Effective Shareholder Agreement CreationThere are several considerations that may apply to your business and, as a result, should be included in a shareholder agreement. Some of these include:

  • The process for appointing directors and clearly explaining the responsibility of the directors.
  • Voting rules. Certain matters may warrant a unanimous or majority vote, and these should be outlined so that when they occur, a resolution can be reached efficiently and without question.
  • Shares of a company may be bought and sold over time, and shareholders should know their rights when it comes to moving shares of a company around. There are several provisions that may be included in this section, such as first right of refusal or pre-emptive rights, to name a couple.
  • Determine the process for valuing shares and a dedicated time every year or more than once a year when shareholders must calculate their shares.
  • A section on how to handle unexpected life events like death, divorce, or incapacitation should be put in place just in case an emergency or unforeseen event takes place that could impact a business.
  • Dispute resolution procedures should also be addressed because when more than one party is involved in critical decision-making, it is inevitable that disagreements to some extent will happen. Knowing how to systematically respond to bring about the most advantageous solutions can reduce the chances of adverse impacts on the running of a business.

It can be uncomfortable to have to think about the worst-case scenarios. Doing so in advance, though, and accounting for these situations in a shareholder’s agreement can make a big difference in keeping a company sound and operational should problems come up in the future.

Speak to an Attorney at Leiva Law Firm Today

California business owners who would like help setting up their businesses for success can count on the knowledgeable legal counsel of Leiva Law Firm. Marlene Leiva has more than two decades of experience helping businesses meet their objectives. To schedule a free consultation to learn more about shareholder agreements, please call Leiva Law Firm today at (818) 519-4465. 

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