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

Legal Templates

Legal Templates
  • Business Forms
    Business & Contracts

    All of our legal contracts and documents are drafted and regularly updated by attorneys licensed in their respective jurisdictions, paralegals, or subject matter experts. Save your hard-earned money and time with Legal Templates.

    Top Business Forms
    Business Formation
    • Business Plan
    • LLC Operating Agreement
    • Articles of Incorporation
    • Corporate Bylaws
    • Buy-Sell Agreement
    Business Operations
    • Business Contract
    • Partnership Agreement
    • Non-Disclosure Agreement
    • Release of Liability
    • Letter of Intent
    Sales and Payments
    • Purchase Agreement
    • Sales Agreement
    • Invoice
    • Purchase Order
    • Business Purchase
    Employment and HR
    • Employment Contract
    • Employment Offer
    • Employment Verification
    • Freelance Contract
    • Non-Compete Agreement
    View All Business Forms
  • Real Estate Forms
    Real Estate

    All of our legal contracts and documents are drafted and regularly updated by attorneys licensed in their respective jurisdictions, paralegals, or subject matter experts. Save your hard-earned money and time with Legal Templates.

    Top Real Estate Forms
    Landlords
    • Lease Agreement
    • Property Management
    • Eviction Notice
    • Late Rent Notice
    • Lease Termination
    Tenants
    • Room Rental
    • Sublease Agreement
    • Roommate Agreement
    • Notice to Vacate
    • Early Lease Termination
    Home Ownership
    • Real Estate Purchase Agreement
    • Mortgage Deed
    • Quitclaim Deed
    • Deed of Trust
    • Moving Checklist
    View all Real Estate Forms
  • Personal & Family Forms
    Personal and Family

    All of our legal contracts and documents are drafted and regularly updated by attorneys licensed in their respective jurisdictions, paralegals, or subject matter experts. Save your hard-earned money and time with Legal Templates.

    Top Personal and Family Forms
    Estate Planning
    • Power of Attorney
    • Last Will & Testament
    • Living Will
    • Advance Directive
    • DNR Form
    Personal Finance
    • Bill of Sale
    • Loan Agreement
    • Purchase Agreement
    • Promissory Note
    • Sales Agreement
    Family Matters
    • Parenting Plan
    • Child Travel Consent
    • Divorce Agreement
    • Separation Agreement
    • Prenuptial Agreement
    Affidavits
    • General Affidavit
    • Gift Affidavit
    • Affidavit of Identity
    • Affidavit of Residence
    • Affidavit of Death
    View All Personal Forms
  • Support
    Resources
    • Business
    • Real Estate
    • Personal and Family
    • Financial
    • Estate Planning
    Support
    • About Us
    • Careers
    • Contact Us
    • All Legal Documents

    Monday - Friday | 9AM - 7PM EDT

    (855) 335-9779

  • Sign In
  • :email

Home Business Shareholders Agreement

Free Shareholders Agreement

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

Updated January 18, 2023

A Shareholders’ Agreement, also known as a stockholders’ agreement, is a formal contract that sets out and explains the structure and nature of the shareholders’ relationship with the corporation and one another. Corporations find this type of agreement highly valuable because it helps create a strong foundation for the corporation.

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.

These agreements can also become overly restrictive. It is essential that proper wording is used and that both parties understand what is being asked of them.

Table of Contents
  • What is a Shareholders' Agreement?
  • When Do I Need a Shareholder Agreement?
  • The Consequences of Not Having a Shareholder Agreement
  • The Most Common Shareholder Relationships
  • What Should be Included in a Shareholders' Agreement?
  • Frequently Asked Questions

What is a Shareholders’ Agreement?

A Shareholders’ Agreement is a legal document used to define how shareholders should control a corporation and what are their rights and obligations. As a direct line between the corporation’s shareholders and directors, this agreement helps shareholders agree on the expectations of all parties to the contract. Legal problems can arise from misunderstandings, and this document reduces misconceptions, so there are fewer risks of lawsuits and related difficulties.

Here are the intended use cases:

  • Protect the interests of current shareholders, including minority shareholders who don’t hold too much voting power.
  • Provide rules about the distribution of dividends and issuing of stocks and bonds.
  • Help shareholders decide what individuals/business entities can become shareholders in the future.

What is the difference between Shareholder Agreements and Corporate Bylaws?

The main difference is that a shareholder agreement is an optional document used to introduce rights and obligations to the shareholders, while corporate bylaws are the rules and regulations for operating the corporation.

The bylaws are created shortly after the corporation is created, alongside the articles of incorporation, and they form the legal foundation of the entity. On the other hand, the agreement focuses more on outlining provisions regarding the relationship between shareholders and their involvement within the business.

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. Still, they can and do offer valuable protection and information for shareholders and directors.

If you have outside investors

Additionally, this document will be needed if the corporation plans to take money from outside investors. Anyone who invests in a corporation will want to know how that corporation intends to use its money and what it will be getting for its 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. 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 severe consequences for not having one available and in use. The two most significant consequences are a lack of funds and disagreements between the shareholders and/or directors that are not easily solved. These serious problems can strongly affect corporations if they are not dealt with correctly.

Investors generally want to see a Shareholder Agreement

Investors are not usually comfortable providing money to corporations that are not well organized and do not show a straightforward 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 withdraw their support. Before investors provide capital, they will carefully study the corporation to make a good decision that will benefit them in the short and long term. Corporations without these agreements do not show investors what they need to see to feel comfortable with how they will get their investment back over time.

Disputes will be harder to resolve.

Additionally, many agreements belonging to small corporations are only created when a problem develops. It can be tough to agree to this type by that time 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. Suppose there are disagreements at a later date. In that case, all shareholders and directors can be held this document, so there are no legal ramifications from not having a formal agreement.

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

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

By then, 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. Everyone agrees to it on good terms when it is created right from the beginning. That is the best time to ensure 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 severe concern for all parties, but if there is no agreement from the beginning, there is little that shareholders can do once things go wrong.

The Most Common Shareholder Relationships

The majority of relationships come through family or employees.

A person may own a corporation and 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 company shares; in some cases, those shares are gifted to employees for specific reasons or milestones. The corporation must keep track of the followings:

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

With that in mind, however, there are several ways a corporation can ensure employees are getting shares and that the corporation is still maintaining proper control. One of those ways is through a Stockholders 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 at all, the relationships can suffer and become more confusing.

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

What Should be Included in a Shareholders’ Agreement?

The Shareholders’ Agreement is not a requirement for a corporation, so there is technically nothing that “should” be included in it, in the sense that no specifics have to be in it 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 correct 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 needs to touch on the following matters:

  • 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 majority shareholders can make decisions or sit on the board of directors. It 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 in their particular role.

Furthermore, consider the following elements when creating a Shareholders’ 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 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 to be shareholders, and that can reduce anxiety and related problems.

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

Shareholder Agreement Sample

Below you can see a sample of our Shareholder Agreement. You can download the blank template in PDF or Word format, or let us walk you through the document through our step-by-step builder.

Sample Shareholder Agreement

Download PDF
Download MS Word

Frequently Asked Questions

Do all shareholders have to sign a Shareholders’ Agreement?

Shareholders’ Agreements are optional documents so a corporation can function without one. However, all shareholders must agree upon and sign the document to be valid.

A corporation might have an organizational document that states the agreement can be adopted with a majority, in which case it’s not a unanimous shareholders agreement.

Does a Shareholder Agreement need to be notarized?

A Shareholder Agreement doesn’t need to be notarized. It is a confidential contract between shareholders and must be signed by all parties.

What happens if a Shareholder Agreement is breached?


The shareholder agreement should outline what happens if the agreement is breached. If shareholders breach the agreement, they will be prevented from voting at any shareholder meetings until the breach is resolved. If the shareholder fails to rectify the violation within a specific timeframe, the corporation may buy the defaulting shareholder’s shares and remove the shareholder from the company.

Is a shareholder agreement legally binding?


Yes, a shareholder agreement is legally binding as long as it is signed by all parties and complies with other legal requirements.

When should a Shareholder Agreement end?


A shareholder agreement should end in line with the end date included in the agreement if there is one. An end date is not required, but it is recommended. If there is no end date in the contract, then you will need to use a notice of contract termination typically.

If there’s no end date in the shareholder agreement, then, generally, use a notice of contract termination when:

  • There is only a small number of shareholders within the company
  • The corporation is not considering new shareholders
  • All shareholders get along with each other

You should include an end date in the shareholder agreement to avoid conflict. An end date means the shareholders can cancel the agreement regardless if all parties agree. This can avoid difficulties, such as if one shareholder refuses to terminate the shareholder agreement even if it’s in the company’s best interests.

If an end date is included, the agreement can still be renewed at any time before. 

What is the difference between a Partnership Agreement and a Shareholder Agreement?


The difference between a partnership agreement and a shareholder agreement is that one applies to a formal legal partnership entity, and the other applies to a corporation.

Can I write my own shareholder agreement?


Yes, a shareholder agreement can be amended. If circumstances change, then you can amend or revoke a shareholder agreement. However, it must involve the relevant shareholders and be properly signed and executed by each.

What happens if liability is not accepted?


You can write your own shareholder agreement. The easiest way to write your shareholder agreement is to use a shareholder agreement template that includes all the essential information to create an effective document.

Do I need a lawyer for a shareholder agreement?


You don’t necessarily need a lawyer for a shareholder agreement, but it can help if you don’t understand the terms and conditions of the contract. Depending on the complexity of the shareholder agreement required, you may want to seek legal assistance.

Related Business Operations Documents

  • Corporate Resolution: Put a company's board of directors' decisions in writing.
  • Stock Purchase Agreement: A contract signed by both the company (or shareholders of a company) and the buyers of the stock.
  • Stock Certificate: Proves and records ownership of a certain number of shares or stocks in a corporation.
  • Partnership Agreement: A Partnership Agreement is a document detailing the terms of a partnership when two or more people share ownership.
shareholder agreement template Preview PDF

Free Shareholder Agreement Template

Create Your Shareholder Agreement in Minutes!

Legal Documents
  • All Legal Forms
  • Business Forms
  • Real Estate Forms
  • Personal and Family Forms
Popular Forms
  • Lease Agreements
  • Power of Attorney Forms
  • Eviction Notice
  • Living Will
  • Non-Disclosure Agreement
Resources
  • Legal Resources
  • Business
  • Real Estate
  • Personal & Family
  • Estate Planning
  • Financial
Company
  • Pricing
  • About Us
  • Careers
  • Contact Us
  • Partner With Us
Users
  • Account
  • Terms of Use
  • Privacy Policy
  • Do Not Sell My Personal Information
McAfee - Together is power.
Trustpilot
BBB Accredited Business

(855) 335-9779, Monday-Friday, 9AM - 7PM EDT

Facebook Twitter LinkedIn youtube Youtube

Copyright 2023 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. Legaltemplates.net is owned and operated by Resume Technologies Limited, London with offices in London United Kingdom.”

Esc
shareholder agreement template

The document above is a sample. Please note that the language you see here may change depending on your answers to the document questionnaire.

Fill in the details

Thank you for downloading one of our free legal templates!

Would you leave us a review?

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

A review would mean the world to us (it only takes about 15 seconds).

Please check your download folder for MS Word or open tabs for PDF so you can access your FREE Legal Template Sample

Thanks again, and good luck!

Leave My Review