Important Details to Include in Your Shareholder Agreements in Chicago

All shareholders’ agreements differ based on the companies they are created for. Additionally, different shareholders often want to include various provisions depending on the amount of the business they own.

For this reason, putting together a detailed shareholder agreement can be a complex and challenging process. Despite these differences, there are certain universal elements this type of document should always include, such as:

Director Appointments

One of the first details to include shareholder agreements in Chicago is information about director appointments. Your shareholders’ agreement should detail their rights to appoint a new director, the scenarios in which they may give up that right, and provisions to prevent another shareholder from removing an appointed director.

Information About Management and Obligations

Other areas to address in your shareholders’ agreement are shareholder obligations and management. This information should be included in order to specify how the company will be managed and what shareholders’ obligations are. Moreover, this portion of the agreement dictates which decisions require a unanimous (100%), special (75%), or majority (50%) vote.

This information should also include which decisions may be vetoed, as well as the best way to resolve disputes and deadlocks.

Dividends and Financing

Your shareholders’ agreement should also specify under which circumstances dividends are payable. Many shareholders’ agreements stipulate that shareholders’ contributions may need to be repaid first. Similarly, other agreements may provide that shareholders get “first rights” to offer to fund the company before they can seek external funding.

Learn more about shareholder agreements from franlaw.

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