What is Shareholder Agreement ?

WHAT IS SHAREHOLDER AGREEMENT

Shareholder agreement is treated as supplement legal document for company constitution.

Is a agreement between shareholder with the  Company , it does not means must include  ALL shareholder , it can be prepared based on  their control interest level, type of shareholding etc.

 

IS THE SHAREHOLDER AGREEMENT COMPULSORY ?

It is not mandatory for company to prepare shareholder agreement with Company Constitution is in place.

 

WHAT SHOULD INCLUDE INSIDE THE SHAREHOLDER AGREEMENT ?

There is no standard clause for shareholder agreement. Normally is depend  on shareholder’s objection.

The following is the basic clause :

  • shareholder’s basic right
  • shareholder ‘s right during company on risk status : liqudation, be sued , restructuring
  • how the procedure for decision to be made
  • regulation in allotment of shares and shares transfer
  • tag along and drag along provision

 

WHICH COMPANY SHOULD PREPARE SHAREHOLDER AGREEMENT ?

It is highly recommend that company with large number of shareholder , complex shareholding structure especially involved with another entity.

 

WHEN SHOULD SHAREHOLDER AGREEMENT PUT IN PLACE ?

There is no stipulate time frame when should company prepare and sign the agreement. But is highly recommend that before date of incorporation .

This is good timing to achieve common understanding between shareholder and company.

 

IS SHAREHOLDER AGREEMENT IS THE KEY SOLUTION IF DISPUTE OCCUR AMONG SHAREHOLDER ?

Number of shareholding you hold determine your control power in the Company, what if the following scenario happen ?

Scenario : Company A with 2 shareholder and each other hold 50% of the company share , how shareholder agreement help if there is dispute occur among them ?

Answer : Please ensure that ” Dispute resolution procedure  “was included in the shareholder agreement

WHAT IS DISPUTE RESOLUTION ?

Dispute resolution is a term that refers to a number of processes that can be used to resolve a conflict, dispute or claim.

 

IS THE SHAREHOLDER AGREEMENT AVALIABLE FOR THE PUBLIC VIEWING  ?

NO. Shareholder Agreement is means for private viewing .Only company constitution is avaliable for purchase as it was lodge in with ACRA during incorporation stage .

 

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