SHAREHOLDER RESTRICTIVE AGREEMENT
A well-drafted Shareholders Restrictive Agreement will:
Provision Information & Benefits:
The following information and benefits is what distinguishes us from other online providers.
Bona Fide Offer - Outside party's written offer to purchase with specific terms set forth.
FMV - The appraised or unanimously agreed upon value of the equity interest.
Transfer - Any sale, devise, assignment, transfer, pledge, gift, encumbrance or other disposition of any portion of a shareholder's equity interest.
Transferor - The shareholder who wishes to transfer.
Equity Ownership - Shareholder's proportionate share of ownership.
Restrictions on Transfer
Shareholder may not transfer any part of his equity interest without getting unanimous approval of other Shareholders.
Rights of First Refusal
Option given to Corporation. Shareholder wishing to sell or transfer any part of his equity interest must first offer such interest to the Corporation and other Shareholders. The Corporation has the option to purchase the interest from the Shareholder at a fair market value if there is no outside third party's written offer to purchase. If paying fair market, Corporation must pay at least 25% in cash and may purchase balance of interest pursuant to a promissory note. Corporation does not have to exercise this option.
Sale of Shares
Procedure for notifying other shareholders of desire to sell shares.
Corporation given option to purchase, at fair market value, a shareholder's interest who has died or been declared legally incompetent. Corporation must notify guardian or personal representative. Corporation must pay at least 25% in cash and may purchase balance of interest pursuant to a promissory note. Corporation may use proceeds of an insurance policy to pay for up to 75% of shareholder's interest.
Employee or Officer
If a shareholder ceases to be an employee or officer of the corporation, the corporation has the option of purchasing all of the shareholder's equity interest pursuant to the same provisions related to transfer of shares.
Shareholders agree to exercise the Sub-Chapter S election and not to take any subsequent action which would invalidate or disqualify the S election.
Shareholders agree to at least one annual meeting to elect a board of directors. Shareholders must attend meetings. (However, proxy voting is allowed.) Corporation has option to purchase interest of a shareholder who misses three or more consecutive meetings. Written notice to shareholder required.
Describes how profits will be distributed. Assuming profits are generated and no losses are projected, each shareholder will receive a cash distribution at least equal to his pro rata share of 50% of profits for preceding quarter.
Each shareholder agrees that he will hold harmless and indemnify the Corporation and other shareholders from all costs and expenses associated with defending any action resulting from his violation of the Agreement
All certificates of interest shall be endorsed with a statement indicated the certificates are subject to this Operating Agreement.
Board of Directors
Shareholders agree to vote their respective shares to elect a board of directors for the Corporation.
Defines the Corporation's outstanding common stock and par value and how such stock is divided among the shareholders.
Describes who can make disbursements from Corporation bank account and what additional signatures are necessary.
The Agreement terminates if: the Corporation ceases business; or declares bankruptcy, receivership, or it dissolves; or all the shareholders voluntarily agree to terminate it. If applicable, Shareholders must surrender old stock certificates with restriction for issuance of new certificates without restriction.
Fiscal year begins January 1 and ends December 31, unless otherwise determined by resolution of Shareholders.
All loans must be authorized by resolution of Shareholders.
Such restrictive covenants offer the Corporation statutory remedies for violation and often prevent a Shareholder from unfairly competing against it or disclosing its confidential business information. As always, ensure any such restrictive covenant is within statutory parameters.
Mediation and Arbitration
Mediation and Arbitration should always specify a location in Client's jurisdiction (preferably, in the same county where they run their business). Mediation is a non-binding way to settle the dispute quickly and amicably. If unable to settle in mediation, arbitration is first option available. Arbitration is the preferred alternative to litigation because of speed, cost, and ability to maintain low profile (no info is publicly available).
Always stipulate that the contract will be governed under whatever law the Client ordinarily conducts business. Always make sure that venue and jurisdiction are as convenient to client as possible.
No Modification or Waiver
No modifications except those specifically agreed upon by the parties in writing. Any waiver of a term or provision will not act as a waiver of any other provision.
Notices should always list the current and best addresses where each party may contact the other for whatever reason.
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