Maximizing Relationships Between Businesses And Shareholders
Determining the best buy-sell provisions for corporate shares depend on the needs of the individual shareholders and the nature of the business.
At Blackburn Lawyers, our lawyers represent shareholders and business owners in negotiating fair and reasonable requirements to transfer their shares. We assist clients throughout Richmond Hill, Ontario resolve conflicts over contentious points, such as their rights after they retire, and other future events.
Understanding The Functions Of A Shareholder Agreement
A shareholder agreement is an agreement entered into by shareholders of a corporation. Sometimes the agreement is entered into by all the shareholders and other times only some of the shareholders enter into such an agreement. Shareholder agreements serve two primary functions. Firstly, they deal with the management, financing and operation of the corporation and, secondly, they deal with restrictions on transfer or the circumstances upon which the shares of the corporation may be transferred.
Creating Optimal Arrangements For Management, Operation And Financing
With our decades of experience, we can assess your business needs and goals, and create strategic solutions for:
- Active Management – who should have it, and with how much control?
- Veto Rights – what conditions should trigger the right, and what can negate it?
- Remuneration – manage the monetary rewards issued to shareholders who actively manage the business
- Repayment Of Initial Capital – develop a strategic repayment plan that protects the business, and the shareholders’ initial investment into the company
Shareholders agreements may also provide for direction on how the corporation will finance growth including the obligation of the shareholders to contribute further capital to the corporation and/or raising funds through a private lender. Usually any shareholder obligation to fund the corporation would be on a pro rata basis equal to each shareholders’ ownership interest in the corporation.
Understanding The Options For Selling, Transferring And Assigning Shares
Most shareholders agreements will typically contain provisions outlining the rules for the purchase or sale of shares. Our lawyers draft agreements between business owners and shareholders tailored to their individual needs and rights. We highlight the best strategies that support shareholder autonomy while protecting the interests of the business, including:
- Right Of First Refusal – Should the business be offered the sale of shares first?
- Right Of First Offer – What kind of offer can be made, and at what price?
- Piggy-back Rights or “Tag-Along” Rights – If one shareholder sells his or her shares, would it benefit others to also participate in the sale and sell their shares?
- Carry-Along Rights or “Drag-Along” Rights – Should shareholders be forced to join in the sale of a company?
- Shot-Gun or Buy-Sell Provision – Who benefits – the company or external buyer – if the offer to buy an exiting shareholders’ shares is the same?
- Puts And Calls – Determine what events – a death, a disability, a retirement – will trigger a shareholders’ option to buy or sell his or her shares
Find out how Blackburn Lawyers can help with Shareholders Agreements
A consultation and plan of action may save weeks and months of repairing problems and potential litigation later on. Call Blackburn Lawyers today and let us help you at (905) 884-9242 or send us an email.