Do I Need A Shareholders' Agreement for My Corporation (If So, What Are Some Common Clauses)?

Whether you've recently formed a corporation or are considering doing so in the coming months, a shareholders' agreement is a useful tool to aid in managing the operations of the company, most especially, if there are multiple shareholders of the Corporation. If you are the sole shareholder then you do not need this type of agreement. However, if you have one or more business partners/investors, then entering into a shareholders' agreement might make a lot of sense for your new company.

A shareholders' agreement may cover the rights and obligations of the shareholders, the management and operations of the company, and the restrictions and rights regarding shares in the corporation. Although not legally required, a shareholders' agreement can provide a sense of security and protection for shareholders, especially considering the investment of time and capital they are likely contributing to the corporation.

In addition, these agreements can be used to alter some of the statutory provisions of the NY Business Corporations Law, providing a greater level of control over the companies affairs. Among the various types of provisions that are often found in these agreements, the following are some of the most common:

Election and removal of directors/managers and officers;
Management structure and governing body;
Quorum and voting requirements for shareholders' resolutions;
Quorum and voting requirements for director's resolutions;
Voting agreements;
Restrictions, rights and obligations regarding share transfers
- Right of First Refusal
- Right of Redemption
- Drag Along Rights
- Tag Along Rights
Capital calls and equity contributions;
Non-compete/Non-solicitation covenants;
Confidentiality;
Inspection and information rights;
Dispute resolution;
Termination of the Agreement; and
Dissolution of the Corporation.

While each one of these provisions certainly deserves their own separate breakdown, having a general understanding of what types of matters are covered is the first step in putting together a comprehensive shareholders' agreement for your company. If you have any questions regarding this topic or need a shareholders' agreement drafted for your company, you should contact a competent business lawyer to advise you further.

Disclaimer: This blog post and similar posts are not to be considered as providing legal advice. The discussion here is meant for educational and informational purposes only and shall not create an attorney-client relationship with the readers of this content.