A shareholder agreement (sometimes referred as stockholder agreement) includes the duties of each legal owner of a corporation’s stock, and provisions, conditions, and resolutions that will govern them.
According to corporate lawyers, a clear and comprehensive shareholder agreement will prevent legal loopholes and provide solutions if problems and disputes arise.
In creating such agreement, the following entries should be included that will guide the executive officers:
• The shareholders’ names, addresses, the date of agreement, their signatures, and the company or corporation’s name
• Each shareholder’s percentage of shares
• The process in electing directors and officers of the corporation
• The voting rights of the officers, directors, and shareholders who will make certain decisions on their company’s operation such as selling, loaning, liquidating, terminating, and revising certain provisions
• The duties of officers in managing the corporation’s finances such as depositing checks, cash, and any instrument of payment monies to the corporation’s bank account
• The salaries of each officer decided and voted upon by board of directors
• The provisions, duties, and limitations of the president, vice president, and officers. These include exclusively working for the company and not participating in any business that indirectly or directly competes with the corporation or entering into business deals that will create conflict of interest; their duties to keep records; and other services they should render for the benefit and advantage of the corporation
In the event of termination due to reasons such as violation of their legal obligations or they personally terminate their own employment, executive officers shall be offered to sell their shares.
• Provisions to a shareholder who has been disabled or is unable to perform his/her corporate duties because of mental or physical impairment. These include the weekly salary and compensation; the length of period when the shareholder will no longer receive salary because his/her condition does not improve; and the right of other shareholders to purchase the disabled person’s shares if the disability continues for a certain period of time.
• Provisions in the event of a shareholder’s death. This usually stipulates that the legal representative of the shareholder is required to sell the shares of stock to the corporation.
• Indemnity for a shareholder who is personally held liable for the corporation’s financial duties. In this situation, the other shareholders usually assure they will shoulder part of the financial duties.
• The prohibition of selling, transferring, disposing, or assigning shares to anyone who is not part of the corporation. (This means that shareholders cannot transfer their share to anyone except to the corporation or other shareholders.)
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