Startup Shareholder Agreement Sample

As a startup owner, securing investments from shareholders is an essential part of building a successful business. However, it’s crucial to have a shareholder agreement in place to protect yourself and your investors in case of unexpected events. It’s important to consider several factors while drafting a shareholder agreement, such as ownership percentage, investment amount, and exit strategy.

Here’s a sample of a startup shareholder agreement that can be customized to fit your needs.

1. Purpose and Scope

The purpose of the agreement should be clearly stated, outlining the objectives and goals of the startup and the responsibilities and expectations of the shareholders. This section should also describe the stock issuance, transfer, and repurchase policies.

2. Share Ownership and Capital

This section outlines the number of shares issued, type of stock, and the investment amount of each shareholder. You should also include details on the distribution of profits and how additional capital will be raised, if needed.

3. Voting Rights

Voting rights determine the number of votes each shareholder has proportional to the number of shares they own. It’s important to establish whether voting rights are restricted or unrestricted and if the company can issue preferred shares with special voting or veto rights.

4. Board of Directors

This section outlines the powers and responsibilities of the board, including selecting and removing directors, compensation, and the frequency of board meetings.

5. Confidentiality and Non-Compete

To ensure the protection of your company’s confidential information, you should include sections on confidentiality and non-compete agreements. This may also include provisions to prevent the solicitation of employees, customers, or vendors.

6. Termination and Buyout

The agreement should include a clear termination and buyout process that outlines the conditions under which a shareholder can sell their shares or be bought out by the company. This can help avoid potential conflicts and ensure a smooth transition in the event of a shareholder’s exit.

7. Dispute Resolution

Finally, the agreement should include a clear dispute resolution process to resolve any conflicts between shareholders. This may include mediation or arbitration, and the rights of the parties to seek legal remedies may also need to be outlined.

In conclusion, a shareholder agreement is an essential document for startups that help protect the interests of both the company and its investors. You should consult with a legal professional with experience in business law and corporate governance to ensure that your agreement is comprehensive and meets the specific needs of your startup.