Should Your Company Have A Shareholder Agreement?

There are various good reasons. First, without a shareholder agreement which contains provisions dealing with share sales, any shareholder would be able to sell his shares to any third party outside the company, subject only to whatever transfer approval requirements are set out in the articles of the company. Prior case law has determined that those transfer approval requirements may not be able to be used to block a share sale to an outside party, so if the shareholders want to be able to protect against unwanted third party shareholders the agreement could include a right of first refusal under which the existing shareholders would have the option to match any third party offer made to one of their co-shareholders and instead purchase the shares of the selling shareholder themselves.