Drafting Shareholder Agreements

Drafting Shareholder Agreements in Alameda County

When individuals form a closely held corporation, a shareholder agreement, also known as a buy/sell agreement, is one of many important documents that an attorney should draft for you. At Cirrus Law PC, we can help you protect your business interests and ensure that your shares are directed appropriately regardless of future events. For example, if you have a small business in the East Bay, you will want to carefully control what happens to your shares in the event of transfers, sickness, death or divorce. Our knowledgeable Pleasanton business lawyers have numerous years of experience counseling business owners and drafting shareholder agreements.

What Are Shareholder Agreements?

Shareholder agreements are contracts among shareholders and the corporation that outline the circumstances in which shares in the corporation will be bought, sold, or otherwise transferred between shareholders. Without an appropriate shareholder agreement, shares will be treated like other property: they are subject to the laws of divorce or probate, and have no restriction on transfer.

One of the most important and common provisions in a shareholder agreement allows the corporation to buy back stock in the event of a shareholder's death. More often than not, shareholders do not want to be co-owners with the heirs, children, or spouses of their fellow shareholders because they lack the skills or common interests of the original shareholder. If a corporation doesn't have enough money to buy back the stock, the shareholder agreement may provide that other shareholders can buy the shares.

Another common provision is the right of first refusal, which allows the corporation or other shareholders to purchase a shareholder's stock if he or she wants to transfer it. Again, this is to avoid bringing people into a business who may not have the same skills or interests of the original shareholder.

Other provisions to be considered depend on the nature of the company. For example, a start-up that requires all shareholders to participate at a certain level may include a provision that allows for a buyout to repurchase the stock of a shareholder who proves unable to meet the company's standards for performance.

It may also be appropriate to include a provision related to divorce. Usually a "Consent of Spouse" document is executed by a shareholder's spouse and attached to the shareholder agreement. Since California is a community property state, for example, if your partner started the business while married and owns 60% of the business, when she gets a divorce, her husband will own 30% of the business. You and your partner may not have intended to involve her husband in your business at all. If that is the case, your shareholder agreement should reflect your true intentions.

East Bay Business Lawyer Experienced in Drafting Strong Shareholder Agreements

With decades of experience in business law, our attorneys can help draft a strong shareholder agreement that takes into account your company's goals and strategies. We will focus not only on transfers of shares, but also the handling of proprietary information after a shareholder has transferred his share, as well as noncompetition issues. Contact knowledgeable Pleasanton LLC attorney Joshua Brysk at (925) 463-1073 or via our online contact form. We serve clients in San Ramon, Fremont, and the surrounding areas throughout the East Bay and Northern California.

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