Shareholder Agreement

Everything you need to know about getting a Shareholder Agreement on Goodlawyer: pricing, scope of work, benefits, and frequently asked questions.

  1. What is a Shareholder Agreement?
  2. Pricing and Scope
  3. What is the Process?
  4. Why does my business need a Shareholder Agreement?
  5. What risks will this protect my business from?
  6. Frequently Asked Questions
  7. Book a Shareholders Agreement

 


What is a Shareholder Agreement?

Starting a business is a lot of work and it takes an entire team of people. It’s important that your business has a rock-solid Shareholder Agreement that clearly explains the rights and responsibilities of everyone who is invested in the business’ success.

Shareholder Agreements are used by incorporated businesses with multiple owners, or shareholders and are essential for organizing your business to grow. They govern the relationship between shareholders and their relationship with the corporation. Topics covered in a Shareholders Agreement often include how shares can be issued or transferred, the types of business decisions that require shareholder approval, and protections for minority shareholders.

This service is for businesses with multiple owners or shareholders that want to organize their company to clarify expectations, avoid disputes, and grow. If you'd like to learn more about this service, check out one of our blog posts below:

 


Pricing and Scope

Shareholder relationships can vary drastically, which means the complexity of the Shareholder Agreements and therefore the price varies as well. At Goodlawyer, part of our mission is to always provide upfront fixed prices for legal services, so we've created a basic and complex Shareholder Agreement to give business owners more choice and more control.

 

Basic ($1,200 + Tax)

$1,000 legal fee + $200 service fee

Suitable for:

  • Companies with a simple business structure that are not high-growth oriented.

Inclusion of any of the below criteria might make a matter 'basic':

  1. Companies that use a closely held business model.
  2. The addition of future shareholders is unlikely and/or not anticipated.
  3. Corporations that have issued a single series/class of shares.

    Where customization efforts exceed the "basic" threshold, the Shareholder Agreement moves to the Complex tier outlined below.

    Complex ($1,800 + Tax)

    $1,500 legal fee + $300 service fee

    Suitable for:

    • Companies that are high-growth oriented with an unequal equity split.

    Includes all service elements from the Basic Tier. Inclusion of any of the below criteria will make a matter 'complex':

    1. Companies that are high-growth oriented where the addition of future minority shareholders is very likely and/or anticipated.
    2. Corporations that have issued multiple series/classes of shares.
    3. Governance and management decisions requiring multiple shareholder approval thresholds.
    4. Shareholders that are required to contribute future/additional capital in the form of shareholder loans, shareholder guarantees, or subscriptions for new shares/equity.
    5. Joint venture corporations (JVC).

      Where customization efforts exceed the “complex” threshold, a custom price quotation is suitable. Where customization requires the lawyer to prepare a new shareholder policy, the service is suitable for a custom price quote. Your lawyer will always seek your approval on custom quotes before proceeding — no surprises.

      Every Shareholder Agreement over Goodlawyer includes:

      • Client intake meeting to help your Good Lawyer identify your business needs that will be reflected in the Shareholder Agreement.
      • Drafting a Shareholder Agreement for your business.
      • One round of minor revisions. 

      Not Included:

      • Negotiation of terms on behalf of any shareholder, founder, or investor.
      • Issuance or marking of shares.
      • Directors’ resolutions.
      • Custom drafting to account for family trusts.

      Other Considerations

      • As an early-stage co-founder, consider our Startup Bundle and save $1,080. This bundle includes a complex tiered Shareholder Agreement, complex tiered Employment Agreement, and Incorporation of your business.
      • If you are already using a Shareholder Agreement but want to ensure it’s meeting your business’s needs? Book a contract review with a Goodlawyer at $25 per page to have your Shareholder Agreement assessed.
       

      What is the process?

      1. Book a call: Pick a time to discuss your Shareholder Agreement with a Good Lawyer. They'll help you determine if you need a Basic or Complex agreement.
      2. Design your Agreement: You’ll have a call with your Good Lawyer where they will collect all the required information to draft a Shareholder Agreement that meets your business’s needs.
      3. Revise your Agreement: You might need to negotiate with your shareholders on the agreement. The first instance of the agreement is often not the final document, especially if other shareholders are exercising their right to seek independent legal advice. One round of minor revisions following negotiations is included in a Goodlawyer Shareholder Agreement.
      4. Receive your Agreement: Once negotiations and revisions are finalized, you will receive a copy of the Shareholder Agreement, ready for use.



      Why does my business need a Shareholder Agreement?

      Set the right expectations.

      A Shareholder Agreement will ensure that all shareholders understand what rights they are entitled to, as well as what is required of them. For instance, the Shareholder Agreement may outline current shareholder rights when the corporation issues new shares; it may specify which business decisions require shareholder approval, as well as what level of approval is required; the Agreement may require specific approval before shares can be transferred; it may even require certain shareholders provide additional capital to the corporation. A custom-drafted Shareholder Agreement will help ensure that all shareholders are on the same page from the start.

      Protect your minority shareholders.

      Without a doubt, you have friends and family that invested in your business. But what if they don’t own enough shares to have buying and selling power? A proper Shareholder Agreement will establish these minority shareholders’ rights to sell their shares or buy more if majority shareholders decide to sell their shares in the corporation.

      Increase investor confidence.

      Investors are more likely to be interested in well-organized businesses that have minimized their legal risks. Having a strong Shareholder Agreement in place will help you get a few steps closer to increasing investor confidence that the business’s current shareholders have mitigated the risk of a dispute.

       


      What risks will this protect my business from?

      Avoid lengthy and costly disputes.

      Shareholder Agreement will provide guidance to all parties if any confusion about shareholder rights or obligations arise. For example, what happens if a shareholder fails to meet their financing obligations? How can board members be removed, and how can board vacancies be filled? How is the share value to be calculated? A well-written Shareholder Agreement should clearly answer these types of questions to avoid lengthy and costly disputes.

      Retain ownership.

      Shareholder Agreements will often include shareholder rights that prevent shareholder ownership from becoming diluted. For example, Pre-emptive Rights can be added that give current shareholders priority on any new shares issued by the Corporation before they’re sold to outside parties. Shareholder Agreements may feature additional rights that provide current shareholders priority, such as Right of First Refusal. This right ensures that any shareholder selling their shares must first offer them to current shareholders.

       


      Frequently Asked Questions

      Are Shareholder Agreements legally required?

      No, it is not a requirement that every corporation has a Shareholder Agreement in place. Companies generally do not need them if there is only one shareholder. However, if there are two or more shareholders involved (this means anyone who invests or co-founds a business), a Shareholder Agreement is strongly recommended.

      What other corporate documents do I need to get my business organized?

      Having shareholders creates additional legal responsibilities. For example, you may require Directors’ Resolutions approving new shareholders; updating minute books and capitalization tables; making and issuance of share certificates, or creating a Stock Option Plan for your employees. Depending on your situation, a Co-Founder’s agreement may also be recommended to help get your business organized. Your Good Lawyer will recommend any additional services to help get your business’s legal strategy on the right track.

      Will my Good Lawyer negotiate with other shareholders on my behalf when drafting the Shareholder Agreement?

      No, your Good Lawyer will draft a Shareholder Agreement based on the information provided about the business and needs of the shareholders as a group. Your Good Lawyer will not negotiate on behalf of any particular shareholder.

      Can I use a Shareholder Agreement I found online, or a template?

      A Shareholder Agreement might be one of the most complex and unique agreements that ever gets drafted for your corporation. No two relationships between co-founders are the same and every business has some level of nuance that can’t be properly captured in a template or automated agreement. Having an experienced lawyer draft a proper Shareholder Agreement from the outset can save you thousands of dollars down the road.

       


      "Top notch service and value for small business's who can't have an in-house legal department. Highly recommend."

      Brad, May 2021 — 5-Star Google Review


       

      Are you ready to build the foundation of your business?

      Book a Shareholder Agreement

       

      Your lawyer will assess your situation and make recommendations on which complexity tier you should consider accordingly.

      Still have some questions?

      Book a free Legal Concierge™ service