Shareholder Agreement Review

Shareholder agreement review .png

Need A Shareholder Agreement? Look No Further Than LifePlan Investments.


No business is free from contentious issues - and that includes from within the company. While companies started by a family, friends, or even long-time associates may run smoothly, one should never assume that issues cannot arise.


That is where a shareholder agreement comes into play.

A shareholder agreement outlines the potential business, financial, and other issues that you may face throughout its lifetime, and establishes rules for how these issues are to be handled.


When is a Shareholder Agreement Recommended?

Shareholder agreements are an obvious choice when a company is co-owned by multiple parties, even when everyone has the best intentions. By establishing plans for addressing disagreements in advance, you can avoid complications later when stress is high or tempers flare.


What Should a Shareholder Agreement Include?

Shareholder agreements generally cover five core areas:

1.  Governance and Decision-Making: How are business decisions to be made and disputes managed? This should include plans for specific concerns, as well as a dispute management plan and resolution process for undefined issues.


2.   Entrance: How can additional individuals become shareholders? Incoming shareholders will need to know that the purchase price is fair, meaning that there is a clear way to determine value. The entry process also needs to align with the exit.


3.   Exit: How can shareholders exit the company, and how will their shares be handled? As with the entrance, there needs to be a clear method of determining the value of the shares. There should also be provisions dealing with death and disability, and the possible role of insurance in funding a buy/sell agreement upon a shareholder death.


4. Compensation: How will the company handle compensation for roles in the business? From a business management perspective, compensation should be based on fair value for the role, separate from individuals’ return on investment as a shareholder.


5. Return on Investment. How will shareholders’ return on investment be realized? This should be measurable against the value of the investment, and should realize a reasonable return on equity. This should also include a reinvestment or dividend policy.


We work with Corporate Lawyers, Estate planners and Accountants to help navigate these issues in your business. This is a fee-based service. Please contact us to book initial free discovery meeting to find how we can help you build a solid business foundation.

Contact our Qualified LifePlan Advisor to Learn More