Whether you are starting a business with a family member, a friend, or another business-minded professional, creating a shareholder agreement may help protect the future of your company by mapping out the process for resolving potential conflict and defining shareholder rights.
Having a shareholder agreement in Florida could make a huge difference for dispute resolution as your business grows and adapts to market changes.
“Developing, discussing, and committing to a shareholders agreement is the first test of whether this group of individuals have what it takes to launch a successful business.”
Business Attorney, Trevor Brewer
What Is a Shareholder Agreement?
A shareholder agreement is essentially a contract between investors that outlines how a company should be operated. Some of the issues highlighted in shareholder agreements include the obligations of each shareholder, rules on transferring shares and rights, conflict of interest, methods for dispute resolution, management of the business, and company finances.
Shareholder Agreements in Florida
There are two types of shareholder agreements recognized in Florida. One type controls voting rights and the other deals with operations.
Voting Agreement
According to Section 607.0731 of the Florida Statutes, voting agreements allow shareholders to form a written agreement determining how they will vote their shares. One common example is a predetermined dissolution of the corporation, which will require shareholders to vote for dissolution at that time.
Standard Shareholder Agreement
General shareholder agreements provide predetermined guidelines for how the business will operate. Unlike corporate bylaws, this document should detail the relationship among owners and their rights and responsibilities as shareholders in the company.
Discussing Shareholder Agreements in Florida
Before drafting a shareholder agreement, it is important to come to a consensus on what the shareholders agree to as far as the purpose and future of the business are concerned. Knowing the intention of each shareholder will help determine the language and provisions of your agreement in a way that is satisfactory to all parties. Here are some important questions to ask.
What Is the Purpose of Your Business?
This may seem like a very basic question, but it is relevant for understanding how shareholders view the business they are investing in. Does your business provide a service, a finished product, a raw material, or something totally different?
What Is the Vision for Your Business as It Grows?
Rarely do investors enter a business without understanding potential growth opportunities. Disputes may arise when shareholders do not share the same vision of the business’s future.
Do Shareholders Want to Sell or Keep the Business?
Exit intent is common for investors who invest in multiple businesses. For a small family business, this may not be true. Knowing the expectations and goals of each shareholder can help guide business decisions and avoid future conflict.
How to Draft a Shareholder Agreement in Florida
Each shareholder agreement is unique to the specific business. Though it may seem tedious, taking into account all the potential disputes that may arise can save a lot of time and grief. These are some of the details that are important to include in your Florida shareholder agreement.
Specify Responsibilities
Outline how officers are appointed and terminated so that boundaries are clear. A shareholder agreement should also clarify what actions can and cannot be taken in the name of the corporation. Define officer and board members’ duties.
Voting Rights
Different decisions may require a different number of votes. Some decisions may be left to the sole discretion of the board of directors. These distinctions should be put into writing to avoid conflict.
Future Decisions
Growth is the goal for virtually every business. Though not every growing pain can be foreseen, it’s important to outline how important decisions, such as those involving property purchases and loans, will need to be made.
Sale and Transfer of Stock
Some things this section should address include:
- The ability of shareholders to control their investment in the company,
- Whether and how external people can become shareholders, and
- How shares may be distributed when a shareholder dies or divorces.
If your business is small, sale and transfer of stock may seem unimportant, but as a business grows, it is best to have restrictions or limitations already in place.
Financial Obligations
Determine how much capital each shareholder is making on their initial investment and the value of in-kind commitment. This will help prevent disputes regarding shareholder expectations.
Importance of a Florida Shareholder Agreement
The shareholder agreement has a direct impact on how decisions are made and how disputes are handled. It is important to cover as much information as possible. Consult an experienced business law attorney to make sure you have not excluded any important areas in the agreement.
Despite the existence of a board of directors and management team, everyone must adhere to the guidelines of the shareholder agreement. Changing the agreement typically requires a 100% vote, making it even more imperative that it is done right the first time. The team at BrewerLong specializes in business law and strives to provide clear, meaningful guidance through complex legal issues.
Call or contact us today for help with your shareholder agreement.
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