A properly drafted shareholders' agreement protects the
interests of both the controlling shareholders and the minority
shareholders. A shareholders' agreement may contain any number
of specific clauses, rights and obligations. Here, we explore five
of the most common clauses in a shareholders' agreement.
a) Shot Gun Clause
A shot gun clause allows a shareholder to offer to sell his/her
shares to another shareholder at a price and on the terms dictated
in the offer. The shareholder receiving the offer may either accept
the offer and acquire the shares of the offering shareholder at the
price and on the terms stipulated in the offer or reject the offer
which requires the shareholder receiving the offer to sell his/her
shares to the offering shareholder at the price and on the terms
stipulated in the offer. This clause is also referred to as a
reciprocal buy-sell clause. It provides liquidity and control over
who can acquire an equity interest in the company, while
