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A shareholders’ agreement is, as you might expect, an agreement between the shareholders of a company. It can be between all or, in some cases, only some of the shareholders (like, for instance, the holders of a particular class of share). Its purpose is to protect the shareholders’ investment in the company, to establish a fair relationship between the shareholders and govern how the company is run.
The agreement will:
set out the shareholders’ rights and obligations;
regulate the sale of shares in the company;
describe how the company is going to be run;
provide an element of protection for minority shareholders and the company; and
Define how important decisions are to be made.
The agreement will contain specific, important and practical rules relating to the company and the relationship between the shareholders. This can be beneficial both to minority and majority shareholders.