Shareholder Agreement for Small Corporations

The corporation

The corporation is a party to this agreement and signs it through an authorized officer.

The corporation's name, exactly as registered with the state

Include "Inc.", "Corporation" or the ending its charter uses.

In which state is the corporation incorporated?

The state where its charter was filed. That state's law governs this agreement.

Date the corporation was incorporated

The filing or effective date shown on the state's record of the charter.

Date this agreement takes effect

Usually the date everyone signs.

How will the corporation sign?

Who will sign for the corporation?

An officer authorized by the board, such as the president.

Signer's title

Corporation's street address

Its principal office.

City

State

ZIP code

Email optional

Used for written notices.

How many shareholders does the corporation have?

This agreement supports two to four shareholders, who together must own all of the corporation's issued shares.

First shareholder

Is the shareholder a business or an individual?

Shareholder's full legal name

For a business, use its registered name, including "LLC" or "Inc." if it has one.

Street address

City

State

ZIP code

Email optional

Used for written notices.

Phone optional

Second shareholder

Is the shareholder a business or an individual?

Shareholder's full legal name

For a business, use its registered name, including "LLC" or "Inc." if it has one.

Street address

City

State

ZIP code

Email optional

Used for written notices.

Phone optional

Third shareholder

Fourth shareholder

Share ownership

How many shares each shareholder owns and the percentage of the corporation's issued shares that represents. The percentages must add up to 100%.

Class of shares the shareholders own

As named in the corporation's charter, for example "Common Stock".

Number of shares the first shareholder owns

First shareholder's percentage of all issued shares

Enter a number such as 50 or 33.33. All shareholders' percentages must add up to 100.

Number of shares the second shareholder owns

Second shareholder's percentage of all issued shares

Enter a number such as 50 or 33.33. All shareholders' percentages must add up to 100.

Board and management

How many directors will the board have?

How are directors chosen?

The shareholders agree to vote their shares to elect directors chosen this way.

Reserved matters

Decisions the corporation may make only with a special shareholder approval, in addition to any board approval.

Which decisions need the special shareholder approval?

Issuing new shares or rights to buy shares

Selling all or substantially all of the corporation's assets

Borrowing money above a set amount

Changing the nature of the business

Amending the charter or bylaws

Deals between the corporation and a shareholder, director or officer

What shareholder approval do those decisions need?

Transferring shares

Whose consent does a shareholder need to transfer shares?

May a shareholder transfer shares to its own trust or a company it controls without consent?

Yes No

The shares stay subject to this agreement, and the new holder must sign on to it.

Who gets the first chance to match an outside offer for a shareholder's shares?

How many days does each of them have to decide?

Include tag-along rights?

Yes No

If a shareholder sells shares to an outside buyer, the others may sell a proportional part of theirs on the same terms.

Include drag-along rights?

Yes No

If shareholders holding a set percentage agree to sell all of the shares to an outside buyer, the others must sell on the same terms.

Should shareholders have the right to buy their share of any new shares the corporation issues?

Yes No

This keeps each shareholder's percentage from being reduced without the chance to buy in.

When a shareholder leaves

Events that give the corporation and the other shareholders the option to buy a shareholder's shares at fair value.

Which events should allow a buyout of a shareholder's shares?

Death

Long-term disability

A shareholder who works for the corporation stops working for it

Bankruptcy of a shareholder

Who has the first option to buy?

How many days does each buyer have to exercise its option?

How is the price set?

How is the price paid?

Deadlock

What happens if the board or the shareholders cannot reach a decision the corporation needs.

How many days should the parties try mediation before other steps?

Confidentiality

For how many years after a shareholder leaves must it keep the corporation's information confidential?

Trade secrets stay protected for as long as they remain trade secrets.

Final terms

Anything else all parties agreed to? optional

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Shareholder Agreement

The corporation

First shareholder

Second shareholder

Third shareholder

Fourth shareholder

Share ownership

Board and management

Reserved matters

Transferring shares

When a shareholder leaves

Deadlock

Confidentiality

Final terms

Review your answers

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