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Date: May 17, 2023
When you end up having more than one shareholder in your business, you will want what is known as a shareholders agreement. You may have questions as to why this is important for your business, what the agreement entails and how we can help with it. To learn about all of these topics in detail (and more!), check out what our team at Wales Accounting has come up with below.
What Is a Shareholders Agreement?
In short, a shareholders agreement is a written contract between shareholders of a corporation. This agreement includes important settlements on rights, restrictions and obligations that each shareholder needs to provide the other with. It targets potential disputes and sets out provisions as to what will happen when a shareholder decides to leave or sell their shares. It also discusses matters involving situations where a shareholder passes away or becomes incapacitated/disabled.
Why Are They Important?
When you first develop a business relationship, it may seem like there would be no chance of it falling apart. This is the farthest thing from the truth, however, as many business partners deal with fallouts and issues like any other relationship in one’s life. When you incorporate a shareholders agreement into a relationship with your business partners, you are making sure that both you and your business partner are safe on the chance something turns sour down the road.
What Should This Agreement Include?
While each shareholders agreement will vary depending on the situation and the field of business, most have a general outline and offer some important protections for both parties. Some of these factors include:
- A death clause: This is so, in the event a shareholder passes away, the money is then given to other shareholders/the family of the deceased evenly amongst themselves.
- A disability clause: When a shareholder becomes permanently disabled or incapacitated, there is a chance that they will be unable to participate in the corporation and its proceedings. Making sure you have a disability clause ensures that in the event this happens, there are plans to be made.
- Exit strategies: When a shareholder wants to leave, an agreement should be made for the situation and how the shares will be affected because of it. Some clauses within these exit strategies include “right of first refusal”, “shot-gun clause” and more.
How Our Team Can Help
Here at Wales Accounting, we provide our clients with the most effective financial services in all of the GTA. If you would like to learn more about our accounting in Richmond Hill and what our team can do for your specific situation, be sure to give us a call at (905) 508-9262 today! We look forward to speaking with you, and helping in any way we possibly can!
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