Briefly stated, it is an agreement amongst the shareholders to establish some basic operating items; to provide arrangements in the case of death/disability, etc.; and to provide dispute resolution provisions.
In my experience, although a Shareholder’s Agreement would be prudent (and necessary), they are often initiated by the clients and their lawyer, but less often followed up to completion. In many cases it proves to be of no consequence but in some cases it is more problematic.
Perhaps one of the best reasons to complete the process is to provide a solution if a shareholder dies – to provide for the sale or redemption of the deceased’s shares and for funds to flow to his/her estate (often funded by life insurance). In the rare case, thankfully, a Shareholder’s Agreement is available to solve a dispute that might otherwise cripple the corporation.
As a lawyer, I suggest you strongly consider seeing the process to completion. I suspect your accountant might agree.
If you want to learn more about whether a Shareholder's Agreement is the right choice for your company, contact our legal team here!
The content of this article is intended to provide a general guide to the subject matter and is not legal advice. Specialist advice should be sought regarding your specific circumstance.