Five clauses to read twice before signing a shareholder agreement
Drag-along rights, leaver provisions and deadlock clauses decide what happens when founders disagree. Here is what to check before the ink dries.
A shareholder agreement is easy to sign and hard to change. The clauses below cause most of the disputes we see, usually years after the document was agreed in a hurry.
1. Leaver provisions
Good leaver and bad leaver definitions decide what a departing founder receives for their shares. Check that the definitions match how the business actually treats people, and that the valuation method is clear.
2. Drag-along and tag-along rights
These rights control whether a majority can force a sale and whether a minority can join one. The thresholds matter more than the wording around them.
3. Deadlock
Fifty-fifty companies need a way out of a stalemate. Without one, a disagreement can freeze the business.
4. Reserved matters
A long list of decisions that need unanimous consent can slow a growing company to a halt. Keep it short and specific.
5. Transfer restrictions
Pre-emption rights and permitted transfers should allow sensible estate planning without opening the door to unwanted shareholders.
The best time to agree how you will part ways is while you still agree on everything else.Statera corporate team
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