• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Legal Templates

Legal Templates
  • Business Forms
    • Business Formation
      • LLC Operating Agreement
      • Articles of Incorporation
      • Shareholder Agreement
      • Partnership Agreement
      • Business Purchase Agreement
      • Joint Venture Agreement
      • Single-Member LLC Operating Agreement
    • Business Operations
      • Letter of Intent
      • Non-Disclosure Agreement (NDA)
      • Non-Compete Agreement
      • Invoice Template
      • Purchase Order
      • Hold Harmless Agreement
      • Release of Liability Form (Waiver)
      • Buy-Sell Agreement
      • Construction Contract
      • Licensing Agreement
    • Employment
      • Independent Contractor Agreement
      • Employment Contract
      • Freelance Contract
      • Leave of Absence Letter
      • Leave of Absence Agreement
    • Cease and Desist Letter
      • Copyright Infringement
      • Debt Collection
      • Defamation
      • Harassment
      • Trademark Infringement
  • Real Estate Forms
    • Lease Agreements
      • Lease/Rental Agreement
      • Sublease Agreement
      • Room Rental Agreement
      • Month-to-Month Lease Agreement
      • Commercial Lease Agreement
      • Short Term Lease Agreement
      • Land Lease Agreement
      • Lease Renewal Agreement
      • Lease Amendment
    • Lease Termination Letter
      • Eviction Notice
      • Notice to Vacate
      • Early Lease Termination Letter
      • Late Rent Notice
    • Deeds & Property
      • Warranty Deed
      • Mortgage Deed
      • Quitclaim Deed
      • Deed of Trust
      • Mechanic’s Lien
      • Property Management Agreement
    • Rental Application
    • Real Estate Purchase Agreement
    • Employment Verification Letter
  • Estate Planning Forms
    • Power of Attorney
      • Medical Power of Attorney
      • Durable Power of Attorney
      • Revocation of Power of Attorney
    • Wills
      • Living Will
      • Last Will and Testament
      • Codicil to Will
    • Advance Directive
    • Living Trust
    • DNR Form
  • Finance Forms
    • Loans
      • Promissory Note
      • Loan Agreement
      • IOU
      • Demand For Payment Letter
    • Bill of Sale
      • Vehicle Bill of Sale
      • Boat Bill of Sale
      • Firearm Bill of Sale
      • Horse Bill of Sale
      • Trailer Bill of Sale
    • Sales & Purchases
      • Sales Agreement
      • Purchase Agreement
      • Gift Affidavit
      • Stock Purchase Agreement
  • Personal/Family Forms
    • Affidavits
      • Affidavit of Death
      • Affidavit of Domicile
      • Affidavit of Heirship
      • Affidavit of Identity
      • Affidavit of Residence
      • Affidavit of Service
      • Affidavit of Title
      • Financial Affidavit
      • Gift Affidavit
      • Small Estate Affidavit
    • Marriage
      • Divorce Agreement
      • Prenuptial Agreement
      • Cohabitation Agreement
      • Separation Agreement
      • Postnuptial Agreement
    • Child & Pet Forms
      • Child Medical Consent
      • Child Travel Consent Form
      • Child Custody Agreement
      • Pet Care Agreement
    • Medical Records Release Form
  • Resources
    • Legal Dictionary
    • All Legal Documents
    • Article Categories
      • Business
      • Estate Planning
      • Financial
      • Personal & Family
      • Real Estate
  • Help
    • Email Us
    • Contact Us
    • About Us
  • Sign In
  • :email
    • Dashboard Home
    • My Account
    • My Billing History
    • Sign Out
  • Help
    • Contact Us
    • Email Us
    • About Us
    • (855) 335-9779 Monday-Friday, 10AM - 6PM EDT
  • Sign In
  • :email
    • Dashboard Home
    • My Account
    • My Billing History
    • Sign Out

Home Legal Documents Shareholder Agreement

Free Shareholder Agreement

Use our Shareholder Agreement to outline the relationship among shareholders in a company, and how it will operate.

Updated November 12, 2020

A Shareholder Agreement affects the shareholders of a corporation. It is a formal contract that sets out and explains the structure and nature of their relationship to the corporation and to one another. Corporations find this type of agreement to be highly valuable because it helps to create a strong foundation for the corporation as a whole.

The owners and directors of the company will interact with one another based on this agreement, so it needs to be strong, thorough, well thought out, and without loopholes, ambiguous wording, or other problems.

As a direct line between the corporation’s shareholders and directors, this agreement provides information on the expectations of all parties to the agreement. Legal problems can arise from misunderstandings, and this document reduces the level of misunderstandings so there are fewer risks of lawsuits and related difficulties.

However, these agreements can also become too restrictive, so it is important to ensure that proper wording is provided and the parties to the agreement all understand what is being asked of them.

Table of Contents
  1. When Do I Need a Shareholder Agreement?
  2. The Consequences of Not Having a Shareholder Agreement
  3. The Most Common Shareholder Relationships
  4. What Should be Included in the Shareholder Agreement?

When Do I Need a Shareholder Agreement?

If you are a corporation

Corporations will generally want to make a Shareholder Agreement. These are not legally required to form a corporation in all states, but they can and do offer protection and information that are both very valuable for shareholders and directors alike.

If you have outside investors

Additionally, if the corporation plans to take money from outside investors, this document will almost definitely be needed. Anyone who invests in a corporation will want to know how that corporation intends to use their money and what they will be getting for their investment.

They also want to know when they can expect dividends and anything else they are supposed to get from their shares, and without a clear document providing that information, they may choose not to invest.

It is important to understand that this document is not required to create a corporation and that some smaller corporations that are not expecting to take any outside money from investors choose not to create one.

The Consequences of Not Having a Shareholder Agreement

Even though this document is not required, there can be serious consequences for not having one available and in use. The two biggest consequences are a lack of funds coming in and disagreements that take place between the shareholders and/or directors that are then not easily solved. These are both serious problems and can affect corporations very strongly if they are not dealt with the correct way.

Investors generally want to see a shareholder agreement

Investors are not usually comfortable with providing money to corporations that are not well organized, and that do not show a clear way for those investors to get their money back through dividends and other means. In short, investors invest because they see the value of doing so.

When they no longer see that value, they can end up withdrawing their support. Before they invest, they will carefully study the corporation so they can make a good decision that will benefit them in the short term and in the long term. Corporations without these agreements do not show investors what they need to see in order to feel comfortable with how they will get their investment back over time.

Disputes will be harder to resolve

Additionally, many agreements that belong to small corporations are only created when there is a problem developing. By that time, it can be very hard to create an agreement of this type, because arguments have ensued.

Rather than allow things to get to that point, creating a Shareholder Agreement right away will reduce problems and the risk of disagreements down the line. If there are disagreements at a later date, the agreement will be something that all of the shareholders and directors can be held to, so there are no legal ramifications from not having a proper agreement available.

You lose the chance to better stabilize your business in its infancy

Most corporations understand that the best time to create this agreement is early on, but in some cases, they avoid making a one. When they fail to create one, they generally find that they only need it when problems appear.

By then, of course, it is too late to come up with an agreement that everyone can agree on and that is fair to all because there is too much dissent among the ranks. When it is created right from the beginning, everyone is agreeing to it on good terms. That is the best time to make sure the agreement is fair and just to all of the shareholders and directors of the company, instead of only to some.

Strong-arm tactics are more common when shareholders are already struggling to get along with one another, and they may not get along as well later on as they did in the beginning. That can be a serious concern for all parties, but if there is no agreement in the beginning there is little that can be done once things go bad.

The Most Common Shareholder Relationships

The majority of relationships come through family, or through employees.

How Do Family Members Become Involved?

A person may own a corporation, and decide to make their children and other family members shareholders. By doing that, they give those family members shares of the corporation, which have value. But they also likely want to make sure they are keeping majority control over that same corporation, so they will need to:

  • be careful how many shares they give or sell
  • not give too much to the same person
  • pay close attention to buying/selling shares
  • create restrictions to ensure they keep majority control

When an Employee Becomes Involved

Many corporations allow employees to purchase shares of the company, and in some cases, those shares are gifted to employees for specific reasons or milestones. It is important that the corporation keep track of:

  • who is getting what shares
  • in what numbers
  • the power and relationship balance

With that in mind, however, there are a number of ways that a corporation can make sure employees are getting shares and that the corporation is still keeping proper control. One of those ways is through a Shareholder Agreement, which will spell out the relationship in more detail and help ensure that everyone understands their roles, rights, and responsibilities. When this is not done correctly, or not done at all, the relationships can suffer and can also become more confusing.

That can cause problems for people who own corporations, and also for their family members and employees who may own shares of the corporation but not understand what the value of that ownership is or if there is something they are supposed to do with the shares in order to get their maximum benefit. They may also expect more from the ownership of those shares than the corporation is planning to give, which can leave shareholders frustrated and angry over the misunderstanding.

What Should be Included in the Shareholder Agreement?

The Shareholder Agreement is not a requirement for a corporation, so there is technically nothing that “should” be included in it, in the sense that there are no specifics that have to be in it, in order to make it valid. These agreements are very flexible documents, so they can be tailored to the corporation to which they belong and can provide proper and accurate information to the directors and the shareholders.

Generally, though, the latter will have a hand in the decision-making power of the directors and the corporation, so they can help to steer the corporation forward in a way they feel good about.

The agreement should also include:

  • majority and minority shareholders
  • the difference between those two categories
  • why it matters
  • that investment money is not needed for shares
  • how to transfer shares

The power to make decisions or have a seat on the board of directors of a corporation goes to the majority shareholders, and will not go to minority ones in the vast majority of cases. Because of that, shareholders need to know what they own and where they stand, based on how the corporation expects to treat them and what it requires from them in their particular role.

Furthermore, consider the following elements when creating a shareholder agreement:

  • Who the directors are
  • Who the shareholders are
  • What happens if one dies
  • How shares are given to or sold to individuals
  • How shares are sold back to the company or to others
  • How dividends are paid from owning shares
  • Any other perks that are given to parties to the agreement
  • Any rights and responsibilities the parties have

This agreement will help reduce the chances that people may misunderstand what they must do in order to be shareholders, and that can reduce anxiety and related problems.

When it comes to corporations, it is important that their shareholders know what they are required or not required to do, so they do not end up making decisions based on erroneous information. A provision for other shareholders to buy the shares of those deceased or retiring is generally also included in this agreement, to make sure these shares can be dealt with and valued appropriately.

Shareholder Agreement Sample

The sample shareholder agreement below details an agreement between ‘ABC, Inc.’ and the shareholders, ‘Roberto J Williamson’ and ‘Alice J Macarthur’. Roberto J Williamson and Alice J Macarthur agree to their duties regarding the management and supervision of the company.

Sample Shareholder Agreement

Related Business Formation Documents

View All Documents

Start a Business

  • Amendment to LLC Operating Agreement
  • Articles of Incorporation
  • Corporate Bylaws Template
  • LLC Operating Agreement
  • Partnership Agreement Amendment
  • Single-Member LLC Operating Agreement
  • Stock Certificate
  • Stock Purchase Agreement
  • Trademark Assignment Agreement

Create a Partnership

  • Assignment of Partnership Interest
  • Partnership Agreement

Protect Your Business

  • End User License Agreement
  • Privacy Policy
  • Terms of Use Agreement
shareholder agreement template
PDF Word

Free Shareholder Agreement Form

Create Your Shareholder Agreement in Minutes!

Legal Documents

  • All Legal Forms
  • Bill of Sale Forms
  • Quitclaim Deed
  • Cease and Desist
  • Last Will and Testament
  • Articles of Incorporation

Popular Forms

  • Lease Agreements
  • Power of Attorney Forms
  • Eviction Notice
  • Living Will
  • Non-Disclosure Agreement

Resources

  • Legal Dictionary
  • Business
  • Estate Planning
  • Financial
  • Personal & Family
  • Real Estate

Company

  • Home
  • Pricing
  • Blog
  • About Us
  • Contact Us
  • Partner With Us

Users

  • Account
  • Terms of Use
  • Privacy Policy
  • Do Not Sell My Personal Information
  • Cookie Preferences
McAfee - Together is power.
Trustpilot
BBB Accredited Business

(855) 335-9779, Monday-Friday, 10AM - 6PM EDT

Facebook Twitter LinkedIn

Copyright 2021 Legal Templates LLC. Legal Templates LLC is not a lawyer, or a law firm and does not engage in the practice of law. Legal Templates cannot and does not provide legal advice or legal representation. All information, software and services provided on the site are for informational purposes and self-help only and are not intended to be a substitute for a lawyer or professional legal advice. Use of this site is subject to our Terms of Use.

Thank you for downloading one of our free legal templates!

Leave us a review?

We hope you've found what you need and are able to avoid the time, costs, and stress associated with dealing with a lawyer.

If you have a moment, a review would mean the world to us (it only takes about 15 seconds).

Thanks again, and good luck!

Leave My Review