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| Shareholder Agreement Questionnaire |
| This questionnaire will help you work through the basic structure of the relationship between shareholders. You will however need the expertise and experience of a lawyer to draft the agreement. For assistance in drafting your shareholder agreement, please contact Paul Clark. |
1. Parties |
Who will the parties be? |
2. Capital |
(i) What will be the paid up capital of the company?
(ii) Who will be the shareholders? They need not be the parties but can be nominees of the parties.
(iii) How many shares will each shareholder hold?
(iv) Will all shares have the same rights or will there be for example voting shares and equity shares? |
3. Business of the Company |
(i) What will the business of the company be?
(ii) Will there be any non-compete provisions prohibiting parties to the agreement and their nominated shareholders from being involved in any competing business:
(iii) Will the non-compete covenants also apply to related entities of the parties ie. associated companies, family members, etc.? |
4. Directors |
(i) How many directors of the company will there be?
(ii) Who will be the initial directors?
(iii) Will each party have the power to appoint and remove a particular number of directors?
(iv) What is the quorum of directors for a Directors' Meeting?
(v) Must the quorum include one director who represents each party? |
5. Chairman |
(i) How will the Chairman be appointed?
(ii) Will a particular party have the right to appoint the Chairman or will that right rotate between the parties and if so, how often?
(iii) Who will be the first Chairman? |
6. Motions at Directors' Meeting |
(i) How will motions be carried, by a simple majority or by a majority which includes at least one director who represents each party?
(ii) If by a simple majority will the Chairman have a casting vote if votes are tied?
(iii) What matters must be approved by all parties or by a 75% majority? |
7. Dividend Policy |
Will there be a dividend policy requiring distribution of a minimum percentage of after tax profits? |
8. Accounting Policies |
Will the accounts be audited? |
9. Shareholder Obligations |
Will the shareholders be prohibited except with the consent of other shareholders from:
(i) lending money to the company;
(ii) borrowing on behalf of the company or giving security over property belonging to the company for a loan;
(iii) releasing a debt owing to the company;
(iv) compromising a claim of the company;
(v) entering into a contract on behalf of the company; or
(vi) encumbering all or part of its shares or interest in the company? |
10. Agreements between Company and Shareholders |
Will there be a prohibition on agreements between the company and shareholders which are not negotiated on an armslength basis on normal commercial terms with the prior approval of the Board by 75% majority? |
11. Deadlock Resolution |
Do you require a deadlock resolution provision? A deadlock occurs where parties are unable to agree on a matter of fundamental importance about the operation of the company or the business. The deadlock resolution procedure involves one party making a bid for the other party's shares. The offeree may make a counter offer for a price at least 2.5% (or some other percentage) higher than the bid price. Counter offers continue until no further counter offer is made. The last counter offer is then the strike price and the shares must be sold at that price to the offeror. |
| 12. Pre-emptive Rights |
Will a party have the right to sell all or part of its shares? If so:
(i) must the proposed purchaser be approved by the other parties? Such a provision would effectively enable the other parties to prevent the selling party from proceeding with the sale.
(ii) will the other parties have a pre-emptive right ie. a right of first refusal to purchase the shares at the same price and on the same conditions? |
13. Confidentiality |
Will each party have an obligation to maintain confidentiality in relation to all information regarding the company and its business? |
| 14. Term |
Will the agreement continue for a fixed term or will it continue until terminated by agreement or until one party holds all of the shares in the company, having purchased the shares of the other party/s? |
15. Contributions of the Parties |
What are the:
(i) monetary contributions to be made by each party?
(ii) other tangible contributions (eg. provision of office facilities and office equipment, etc.)?
(iii) intangible contributions (eg. provision of client list, etc.)? |
16. Employees |
Will any of the parties or people related to them be employed by the company? If so, is an employment contract required and what are its terms? |
17. Cheques |
How will cheques be signed? Will they be signed by a director representative of each party or by any two directors or in some other manner? |
18. Name |
What is the preferred name of the company? Contact us to check on name availability for you. |
