This article posted on our partner site Mondaq.com discusses why companies should execute a shareholders’ agreement. The author outlines some of the most common and important shareholder provisions and reviews the rights that can be specified and, thus, protected under effectively drafted shareholder provisions (e.g., right of first refusal before a shareholder is able to sell shares to third parties outside the company, right to require a specified percentage of shareholders’ approval for major management decisions, pre-emptive rights that protect shareholders’ ownership percentages upon future share issuances by the company). The author, however, notes that shareholders’ agreements, which become contractually binding if signed, should be tailored to fit the individual circumstances of each company and its shareholders.
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