Think about this before signing a shareholder agreement

Don’t get into the trap of getting bad deals; consider below tips for a better shareholder agreement

As part of my work as education specialist, founder and business negotiator, I am talking with recognized law firms at times when critical agreements have to be made with shareholders, suppliers and customers.

This blog introduces basic tips to consider before signing a shareholder agreement. The topic is of an importance because loopholes in agreements may lead to law suits, bankruptcy or a substantial personal financial loss. You don’t want that to happen!

19 tips for a watertight shareholder agreement

  1. In a private contract between shareholders; what if:
  • One of the shareholders want to leave the corporation? You may want to decide to  offer the shares to other shareholders first, before going public.
  • Shareholders receive an offer to sell the corporation? All shareholders may have to agree, or major shareholders have to agree. Make this clear in your contract.

2. Consider how much of the profits that needs to be reinvested and paid as dividends

3. A decision needs to be made of the allocation of A shares (voting rights) and B shares (dividend rights)

4. Who is deciding the remuneration, bonuses, and payback structure?

5. In the case of a 50/50 ownership structure: how do you handle a deadlock?

6. If someone in the business brings clients and a deadlock of the split of remuneration occurs; how do you handle this situation and who owns the clients?

7. If one shareholder wants to leave; how is the exit procedure going to take place?

8. If all shareholders are in minority; i.e 33/33/33; make sure to protect each other against ‘ganging up’ at the expense of the third shareholder. This is crucial for sales of shares and decision making.

9. Who has the decision making power in case of a dispute? And for what disputes?

10. Make it clear when a director needs to seek permission of a shareholder in regards to expenses, deductible costs, who to hire, salaries and remuneration.

11. For what type of decisions do shareholders need to get together and make a decision?

12. Decide roles, influence, interests, power, and accountability of directors and shareholders

13. Remember to play nicely; 50% or more can get you removed as 2 members may gang up against the third member. Do you want a clause that directors may not be removed without everyone’s consent?

14. Directors need authority under the articles of association to allot shares.

15. What percentage of shareholders need to back director’s decision to allow new shares to be issued?

16. When shareholders leave the business: do you need a clause that the remaining shareholders must by the shares, or if refusing, making them available to the public?

17. The shareholder agreement should decide what will happen with the shares when shareholder leaves a business

18. In case of a deadlock and a dispute; is the chairman making a final decision, or do you hire a neutral mediator? And for what situations? Who is paying the costs?

19. If shutting down the business; how is this going to be communicated and how do you split revenues and costs?

I hope these “think-about” tips help you to sign a better shareholder agreement that leads to your business success.


By Anthony Eric

Anthony Eric brings a wealth of knowledge in international business and he has gained 14 years experiences of how to communicate effectively, how to plan and evaluate operations for low risk and faster decision making. Anthony has been trained by international institutes in the USA, the UK, Ireland and Sweden and he provides business training and communication training for clients in business, and for clients who aim at succeeding in business. His expertise covers leadership, management communication, business planning and sales management. He currently holds an MBA (England) and BSc Engineering (Sweden) and he has gained 21st century skills and knowledge at global leading institutions such as: The British government, Deloitte, IBM, TietoEnator, Ericsson, Consulting firm Semcon, The Open University, King’s College London, Manchester Business School, The University of Birmingham, Royal Institute of Technology KTH and Harvard University in alliance with IBM Leadership Academy. Anthony is the author of the e-book project management success, available on

Copyright (C) 2018. Anthony Eric by Antonios Papadimitriou. All Rights Reserved.


Published by Anthony Eric

Teacher and gospel preacher. Far east Asia is my home. I'm originally from north west Europe and with a Greek heritage. I graduated in the UK with an MBA in international business. Following 15 years in the corporate world, I'm at present lecturing at the university in far east Asia, and I'm writing books. I'm in the education and realization phase concerning the salvation, and ever lasting life. Jesus Christ is returning soon. Get ready. Spread the gospel. Repent today and change your attitudes, hearts, and minds and do the will of our father in heaven. Follow my charity project on

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