Shareholders' Agreements …are They Necessary?

Shareholders' agreements are optional. They're not regulated by law. Most companies don't have them, and yet they're a vital part of many transactions. In the companies that have them, no person or entity can become a shareholder without agreeing to conditions set out in the shareholders' agreement. These agreements set parameters of conduct, and they seek to align the different interests of disparate shareholders. In short, they provide a framework for shareholders to work together.

What is it?

The simplest description is that it is a commercial agreement among shareholders who set out rules to govern themselves. Like any commercial agreement there are conditions to follow and legal consequences if one does not follow them.