A Shareholders Agreement (SHA) is a legally binding contract that defines the relationship between a company, its shareholders, and its investors. It outlines the terms and conditions agreed upon in the term sheet, ensuring that all parties are aligned on their rights, obligations, and responsibilities.
Why is a Shareholders Agreement important?
An SHA establishes clear guidelines on the roles, rights, and obligations of shareholders and investors, helping to prevent conflicts and ensure smooth decision-making within the company.
What key terms are typically included in a Shareholders Agreement?
An SHA usually includes provisions on voting rights, dividend distribution, share transfer restrictions, dispute resolution, and exit options for shareholders.
How does an SHA differ from a term sheet?
A term sheet outlines preliminary terms for investment, while an SHA formalizes these terms in a legally binding document, detailing each party’s commitments and rights.
Can a Shareholders Agreement be changed?
Yes, changes to an SHA require mutual consent from all parties involved, typically through a formal amendment process.
What happens if there’s a breach of the Shareholders Agreement?
A breach of the SHA can lead to legal action, with consequences depending on the terms outlined in the agreement, including possible penalties or remedies for affected parties.
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