Do I Need A Shareholders' Agreement?

A shareholders' agreement is strongly recommended for privately held companies where there is more than one shareholder. The following sets out certain issues to consider when determining whether a shareholders' agreement is needed. The issues set out below are in no way exhaustive as there is no "model" shareholders' agreement which is appropriate in all circumstances, as each group of shareholders will have unique concerns and priorities. That being said, there are a few basic considerations that most shareholders' agreements contain.

A shareholders' agreement will generally outline the following:

1. a means of dispute resolution — A common dispute resolution mechanism is a "shotgun clause", which is a clause that permits a shareholder to offer to sell his or her shares to the other shareholders but requires that he or she be prepared to buy the shares at that same price if the other shareholders refuse to buy his or her shares. Other dispute resolution