Shareholders’ agreements often include sections requiring all the shareholders to vote for or against particular key matters. These issues will often include:
- the business activities of the company
- mergers and acquisitions involving the company
- the employment terms of the directors
- lending or borrowing over certain sums and
- the dividend policy of the company
The shareholders agreement will often contain a right of pre-emption (or first right to buy) for existing shareholders over the shares of a shareholder leaving the company. This means that leaving shareholders must first offer their shares to the remaining shareholders.
Shareholders’ agreements may include a process for resolving disputes. Examples include referring the issue to a third party expert or arbitrator, or what’s known as a buy-out method where one shareholder buys out the shares of another at a price that’s fixed in the agreement. If a dispute cannot be settled, shareholders’ agreements can contain “deadlock provisions” which allow the parties to vote to wind up the company.
Shareholders' agreements often contain provisions providing for the automatic offer of the shares of one shareholder to the others in certain circumstances, including events of default, incapacity and death.
Clauses that protect the competitive interests of the company restrict shareholders from being involved in competitive activities. Examples include restrictive covenants which prevent the shareholders from being involved in competing businesses and/or from poaching key employees from the company.