Shareholder’s Agreements

Companies often sell shares in order to raise money to fund the company. The people who buy these shares become the company’s shareholders, but it is important for the company to remember that it cannot simply take money from shareholders without granting rights in return. Because shareholders are investing their money in the shares they purchase, they have rights as investors which need to be protected. Since every company has a different relationship with its shareholders, a shareholder’s agreement can provide clear guidelines for how the company is to treat the shareholders and what rights and responsibilities are granted to the shareholders. Our Chicago shareholder’s agreement attorneys are familiar with this process.

Among other things, a shareholder’s agreement can specify how much say a shareholder has when choosing the directors of the company and whether the company can make capital expenditures without approval from the shareholders. Security interests and the company’s assets are also of interest to shareholders, since the way that they are used can have an effect on the shareholders’ investments.

Because the buying and selling of shares is so important to shareholders, some shareholder’s agreements might state when a company can redeem shares, when it can sell more shares, and whether it can sell shares for any sort of compensation other than money. Likewise, a shareholder’s agreement might also specify whether a shareholder has any say in who can buy shares of the company, and if so, to what extent.

In some cases, a shareholder’s agreement might give shareholders the first opportunity to buy new shares of the company. This gives the shareholders a chance to increase their investment in the company and their potential payout if the company continues to do well.

As people with a vested interest in the company, shareholders also usually want to have a say in whether or not the company can begin working in a new business. As companies grow larger and more successful, they often find ways to branch out and diversify. Whether or not this is something that is in the company’s best interest is another matter that shareholders might want to be consulted about. Therefore, regulating this choice to diversify or not is another matter that can be handled by a shareholder’s agreement. A shareholder’s agreement lawyer at our Chicago firm can advise you on whether it should be incorporated in your agreement.

A shareholder’s agreement can help determine what happens to a shareholder’s shares in the event that she dies suddenly or becomes incapacitated. In most cases, the agreement will state whether other shareholders can buy the shares.

Any time that many people have a mutual interest in something of monetary value, disputes can arise. Whether from personal differences or differences of opinion regarding how the company should be run, a shareholder’s agreement can simplify matters by providing guidelines for how disputes are to be handled. In the event that shareholders disagree amongst themselves or with someone in the company to the extent that a third party needs to become involved, the shareholder’s agreement can determine whether the dispute is to be resolved in arbitration or mediation. A mediator does not have any power to reach a binding decision in a dispute, but merely helps the two parties to reach a mutually acceptable conclusion. In the event that the mediator is unable to do so, the dispute might continue in the courts. An arbitrator’s decision is binding and both parties must agree to abide by the decision before entering into arbitration.

The Chicago shareholder’s agreement lawyers at DiTommaso Lubin, PC have decades of experience handling shareholder’s agreements. With offices located in Oak Brook Terrace and Chicago, Illinois, we have represented shareholders and businesses all over the country. To consult with a shareholder’s agreement attorney in the Chicago area today, you can email us online call us at 630-333-0333.