A Shareholder Agreement is an agreement between all or some of the shareholders (or stockholders)
of a corporation. This contract establishes the rights of shareholders and the duties and powers of
the Board of Directors and management. A Shareholders’ Agreement is very beneficial when the
Corporation is closely-held or there are only a few shareholders. Also known as a stockholder
agreement. A typical shareholders’ agreement might do some or all of the following:

  • determine rights related to the sale, issuance or subsequent distribution of shares (e.g. rights of
    first refusal, piggyback rights and pre-emptive rights);
  • set out the rights and duties of the officers and other management;
  • create options to buy or sell the shares (a shotgun clause);
  • determine what will happen in case of death, retirement, etc., of a shareholder (with the value of
    the shares to be calculated according to a certain formula);
  • establish the number of Directors on the Board and their duties;
  • provide existing shareholders with the right to approve future shareholders.