Shareholders are the pillars to any organization. It is well expected to have many disputes within the management/ board members of the organization. Shareholders play a vital role in pooling in income to the organization. Without a proper agreement among shareholders Agreements, disputes cannot be resolved easily and will have a bigger impact on functioning of the business. Shareholders agreeing on many terms, conditions, rules, regulations and clauses will ensure that such disputes are minimized. It ensures the minority shareholders’ rights are protected within the incorporation. Through this agreement it is possible to enforce law on every shareholder of the organization.
When the company is held by an individual, it becomes sole proprietor. Here it is possible for only one person to take decisions and make rules, regulations of their convenience. But when it enters partnership, corporate and cooperative incorporation it becomes difficult to abide by old rules and regulations. This will give rise to revision of all rules and regulations, bringing in a new set of these, which will be feasible for the incorporated organization elements. The major decision makers in the company will be the shareholders. They all have to agree on their roles, liabilities and functions they will undertake for the organization.
This agreement will act as a binding link between shareholders, their money, organization and its elements, business functioning, and Lucid law. Through this it is possible to determine all agreeable rules, regulations, policies and liabilities each shareholder will have to abide by before investing. To ensure the invested money will not be taken off without notice certain clauses which either help or restrict this action are also included. This helps the organization be prepared for situations of fund crunch in due course of time. Protecting the interest and rights of participation of both major and minor shareholders becomes essential through this agreement.
Shareholders are entitled to decide their role for the company. Some might become investors and others might work for the organization for a certain period of time or indefinitely. In either way, it becomes essential for all of them to participate in management decisions. These management decisions will help in amending the agreement on periodic basis based on the convenience and organization Business Structuring complexity. Breach of agreement by any shareholder is possible to be prevented with managerial decisions. The shareholders who become employees of the organization are given a choice to keep the shares or sell them after serving their minimum period of tenure. It is also possible to allow shareholders to exit from the incorporation by abiding to agreement rules and regulations when they wish to do so. At times when all shareholders decide to take out their investment at once, the organization may go into deadlock. Such situations are better to be settled in private and abiding by the agreement of the shareholders. In doing so breach of agreement will be avoided and organizational business will not be handicapped from functioning normally.
Interests of the organization and its elements must be respected and preserved. This will be affected when the companies go public and there are many shareholders investing in the business. By ensuring the investors are comfortable with the shareholder agreement before investing will help the organization be prepared for certain expected crisis and be equipped to handle the uncertainties.