Shareholder Agreement

A Shareholder Agreement is essentially a buyout or buy-sell agreement between the shareholders of a small corporation. Such an agreement is important because the terms of a buyout helps the owners of a small corporation be prepared if and when a shareholder wants to be bought out, dies, goes bankrupt, or perhaps even gets divorced.

Shareholder Agreements control when and how shares in a corporation can be bought and sold. These types of agreements are also sometimes called stock agreements.

The typical shareholder agreement contains the following terms:

* whether a shareholder leaving the corporation must be bought out;

* whether only other shareholders can purchase the stock of a departing shareholder, or whether others may as well;

* the price that will be paid for a shareholder's ownership interest in the corporation; and

* the many other events that may cause a shareholder buyout.

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