Shareholders’ Agreement

Updated for 2014

A shareholders’ agreement is entered into for the purpose of regulating the relationship between a company’s shareholders as the owners of the entire issued share capital of the company and for providing for the management and operation of the company going forward.

This shareholders’ agreement deals with matters such as the management of the company, the issue of new shares in the company, the transfer of existing shares, what the board of directors can and cannot do without shareholder consent, the restrictive covenants (i.e. non-compete, no poaching, etc) that apply to shareholders, and much more.

Further details are set out below.

See below for a full product description
 

This shareholders’ agreement sets out the rules and regulations that apply to the company and its shareholders. It covers matters such as:

- the business that the company can engage in;

- how the company will be managed, how many directors are required to sit on the board, how often board meetings are held, how decisions are made at board level, who is entitled to appoint and remove directors, what decisions the directors can and cannot make, etc;

- how the company’s affairs will be conducted, the nature of the business it can carry on, how the proceeds of investment and loans should be used, how the policy and direction of the company will be determined, whether or not an operating budget will be prepared for each financial year, what rules apply in relation to bank mandates and incurring expenses, whether shareholders have the rights to inspect the books and records of the company, and so on;

- the matters in respect of which the board must obtain prior shareholder approval- such as selling some or all of the company’s business or material assets, paying salaries above certain levels, issuing new shares, purchasing assets above specific prices, borrowing money, granting security over company assets, and so on;

- the process relating to the issue of new shares; whether shareholder consent is required, whether pre-emption rights (rights of first refusal) apply; etc,

- the mechanisms by which shares in the company can be transferred, whether pre-emption rights (rights of first refusal) arise in favour of existing shareholders, when shareholders are obliged to transfer their shares; whether tag along rights apply (i.e. the right of minority shareholders to insist in participating in a deal involving a sale of a significant number of shares by a larger shareholder), whether drag along rights apply (i.e. the ability of majority shareholders to force minority shareholders to sell their shares if an offer is made for the whole company), and so on;

- the non-compete, non-solicitation (customers and employees) and non-interference provisions which apply to current and certain past shareholders; and

- much more.

The shareholders’ agreement also includes standard boiler plate clauses such as in relation to confidentiality, notice requirements, governing laws, etc.

Detailed instructions on each of the clauses in this shareholders’ agreement and on completing the shareholders’ agreement are contained in the notes that accompany the agreement.



Clauses Included:

- Definition and Interpretation Clause

- Business of the Company Clause

- Directors and Management Clause

- Composition of Board of Directors

- Board Meetings

- Appointment of Directors, Alternates and Observers

- Appointment of Chairman

- Conduct of the Company's Affairs Clause

- Matters Requiring Consent of the Shareholders Clause

- Financial Information Clause

- Issue of New Shares Clause

- Charging of Shares Clause

- Transfer of Shares Clause

- Tag Along Rights Clause

- Drag Along Rights Clause

- Events of Default Clause

- Completion of Share Purchase Clause

- Fair Value Clause

- Restrictive Covenants Clause

- Termination Clause

- Status of this Agreement and the Parties’ Obligations Clause

- No Partnership Clause

- Notices Clause

- Confidentiality Clause

- Costs Clause

- Assignment Clause

- Amendments Clause

- Waiver Clause

- Severability Clause

- Counterparts Clause

- Entire Agreement Clause

- Governing Law and Jurisdiction Clause





- Schedule 1 - Details about the Shareholders

- Schedule 2 - Details about the Company

- Schedule 3 - Deed of Adherence

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