Leesburg Shareholder Agreements
Shareholder agreements are essential to the smooth functioning of a Virginia corporation. Essentially, a shareholder agreement will outline the rights and responsibilities of those who hold shares in the company. Although a corporation is run by officers and directors, shareholders are the actual owners. But their ownership is usually “passive,” which gives corporations their unique structure.
At Simms Showers, we can help any business looking to draft shareholder agreements. Instead of using a shareholder agreement template which you find on the internet, you should contact us to schedule a time to meet.
Allocating Decision Making Power
Although most decisions are made by the board of directors, it is possible for shareholders to have some say in how the company is run. The agreement can identify which issues must have shareholder approval. For example, shareholders might want authority to approve of a sale or merger or some other key event.
Protecting Minority Shareholders
In many corporations, certain people have more stock than others, making them “majority shareholders” when they own more than 50%. A shareholder’s agreement can protect those who are in the minority from oppression or any act that threatens them. For example, a shareholder’s agreement can state that minority shareholders can sell shares when majority shareholders do.
Protecting minority shareholders is key if you hope to entice people to invest in your company. Few will want to be a minority shareholder if they are not provided guarantees that they will not be oppressed or exploited.
Identifying How Shares Are Transferred
A shareholder’s agreement should also explain how to transfer shares. For example, you might want a right of first refusal—essentially, current shareholders will have the right to buy when a current shareholder wants to sell. This type of agreement is often attractive if you are trying to limit ownership in the corporation.
Protecting Your Trade Secrets
Shareholders can typically gain access to proprietary information like trade secrets and company lists. When they sell their shares, they could take this information to a competitor. We can draft a shareholder agreement to place restrictions on shareholder access or their ability to start a competing business.
Avoiding Costly Disputes
If your company does not have a shareholder’s agreement, or if you use one that is shoddily written, then many disagreements can threaten your company’s finances. For example, shareholders might deadlock in a dispute with no way of reaching resolution apart from expensive litigation. With the right agreement, you can anticipate problems and create rational methods for resolving them.
Some business disputes are so serious that a company can be dissolved and then wound up. All of your time and investment in the business will be lost, and you will be hard pressed to recoup your losses by restarting the business later.
Contacting a Seasoned Leesburg Shareholder Agreement Attorney
Ideally, a company will have a shareholder’s agreement in place at formation, but one can be created at any time. Please contact Simms Showers today to get started. We help businesses avoid costly disputes by putting in place solid legal agreements. Call to schedule a consultation.