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Shareholder agreement is the basic understanding and agreement between the company and its shareholders. What is important in the agreement is the content of the agreement which basically bind you, the shareholder, and the company.

It is therefore important for a company to form a binding agreement between them and their shareholders or the shareholders of a private company, at the beginning of the company. It is of great value to make clear what is expected of the company, as well as what is expected of the shareholders.

Shareholder agreements are based on important issues which are of great value to both the company and the shareholders. Here are some of the things which define the values of specifying shareholder agreement in a company:

1 Outside Offer

It at times happens in a company that somebody applies to the company to buy 100% of the company; it might also appear that the applicant is not a shareholder of the company. In this case, some shareholders may differ with the request because they would not wish to sell the company, some will however agree with the offer. The agreement which will arise within the disagreement is that those shareholders who differ with the offer should be willing to buy the shares of those who agree to sell. This agreement is important because the shareholders will either agree with the sale or otherwise buy the shares of those who want to sell.

2 Death

The death of a shareholder offers a problem to the company and as well to the family of the deceased. The company will loose active participation from the deceased. The terms of this agreement states that in the death of a shareholder, the company can buy the shares and pay the family, however, this can take a bit long and if so, the company can contact an insurance company for compensation to the deceased family. These are part of the agreements made with the shareholder when he first joined the company and therefore, gives the company an easy time incase of a shareholder's death.

3 Short Term Disability

Normally, agreements concerning short disabilities provide a financially stable state to those shareholders employed by the company. This is because; the disabled shareholder will receive his salary even when he doesn't work. This provides a hard time for the working shareholder, but it is an agreement part of the shareholder. The agreement lasts for a short period of time as long as the shareholder is still disabled, and immediately they get well, they return back to work.

4 Financing

Basically, this agreement provides that the sole sources of borrowing funds into the company are the institutional leaders which basically include banks, credit unions, and trust companies among others. However if the funds are needed urgently, then the shareholders can agree, so that each shareholder can provide the company with the share needed. This will save the company their time and therefore quicken their progress.

5 Calls

This agreement provides that a shareholder can be allowed or granted to buy shares from one or even more of the other shareholders but the condition is that it is at a fixed price and at a specified time.

All the shareholders are subject to the agreements, and this keeps the company moving at a rather quicker pace.

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Article Source: ArticlesBase.com - The Value Of Specifying Share Holder Agreements During A Company Formation