The shareholder agreement helps protect the interests of current shareholders from cases of abuse by future management. If there is new management or the company is acquired by another entity, the agreement helps safeguard certain decisions such as dividend distribution and issuing of new stock or debt.
Some of the issues covered in the shareholder agreement include dealing with shareholders’ issues, corporate distributions, the management team of the company and limitation on authority, rights of minority shareholders, valuation of shares, voting of shares of stock, restrictions on the transfer of shares, allotment of additional shares, etc. The agreement protects shareholders, and it can be used as a reference document if there are disputes in the future.
