Shareholder agreement checklist

The basics

• Parties and shares. Every shareholder named, with the exact number and class of shares each holds.
• Share classes and rights. Voting vs non-voting, dividend rights, and what each class can and can't do.
• Decision-making thresholds. Which decisions need a simple majority, a supermajority, or unanimous consent.
• Board composition. Who appoints directors, how many each shareholder gets, and how the board actually runs.

Control and deadlock

• Reserved matters. A list of big decisions (new debt, issuing shares, selling the business, big contracts) that need special approval.
• Deadlock mechanism. What happens when 50/50 owners can't agree — mediation, a casting vote, or a buy-sell trigger.
• Shotgun / buy-sell clause. How one owner can force a buyout, and how the price is set, when the relationship breaks down.

Transfers and exits

• Right of first refusal (ROFR). Existing owners get first crack before shares can be sold to an outsider.
• Tag-along rights. If a majority owner sells, minority owners can join the sale on the same terms.
• Drag-along rights. A majority can require minority owners to sell into a good third-party deal, so one holdout can't block it.
• Departure triggers. What happens to shares on death, disability, retirement, resignation, or termination — and who buys them.

Valuation and money

• Valuation method. How shares are priced on a buyout — a formula, an agreed number reviewed yearly, or an independent valuator.
• Payment terms. Lump sum or paid over time, with interest and security, so a buyout doesn't sink the company's cash flow.
• Dividend policy. When and how profits get distributed, and when they're kept in the business.
• Insurance funding. Life and disability insurance to fund a buyout if an owner dies or can't work.

Protecting the business

• Non-competition and non-solicitation. Reasonable limits on a departing owner competing or poaching staff and customers.
• Confidentiality and IP. Business information and anything owners create for the company stays with the company.
• Roles and commitment. Who works in the business, expected time, and what happens if someone stops contributing.
• Dispute resolution. Mediation or arbitration before anyone runs to court.