Shareholder Agreements

By Daniel B. Evans
Copyright © 1995 Daniel B. Evans. All rights reserved.

Agreements among the shareholders of a corporation can take a number of different forms, and it is important to consider all possible options.

PERMITTED TRANSFERS. An agreement can prohibit all transfers, or it can permit gifts to certain family members, outright or in trust, and during lifetime or at death. (Permissible recipients can be limited to the founders, their issue, and the spouses of issue, so that stock does not pass to parties unrelated to the original shareholders.)

REDEMPTION OR CROSS-PURCHASE. An agreement can require (or allow):

MANDATORY OR OPTIONAL SALES. When a death or other triggering event occurs, the rights of the parties will fall into one of three possible patterns:

EVENTS REQUIRING SALES OR OFFERS. An agreement can provide for sales or redemptions of stock in any or all of the following cases:

An agreement can deal with different situations in different ways. For example, an agreement could give the corporation the option to purchase stock in the event of an insolvency or third party offer, but could also give a shareholder the right to require the redemption of stock in the event of death or disability.

PURCHASE PRICE. The purchase price for shares to be sold or redeemed can be determined in a number of different ways:

OTHER TERMS. An agreement can also provide for:

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