A shareholder agreement is exactly what it says it is: it is an agreement among the shareholders of a corporation (S or C). A shareholder agreement outlines the rights and obligations of each shareholder. Shareholder agreements, much like a buy-sell agreement contains various conditions under which the owners of a business may buy or sell their shares. For instance, many shareholder agreements contain a “first-right of refusal” which porvides that in the event a shareholder wants to sell its shares, the shares have to be offered to other shareholders or the corporation first and before it can be offered to a third-party. A buy-sell agreement can be incorporated into a shareholder agreement.
Every corporation with more than one shareholder should have a shareholder agreement. A shareholder agreement is not only instrumental when an owner wants to buy or sell shares, but it is also very crucial in helping to resovle a dispute between shareholers.