A shareholder agreement, which is also known as a stockholder agreement, is a legal arrangement among a company’s shareholders that describes the company’s operation and outlines the rights and obligations of shareholders. Although every shareholder agreement is different, there are several key provisions included in most effective shareholder agreements. In this article, we discuss some key clauses and protections of shareholder agreements in Florida.
Key Clauses and Protections
Right of First Refusal
The right of first refusal allows shareholders to purchase the shares of another shareholder who wishes to sell before such shares are offered to outside parties. This right gives shareholders the ability to retain their percentage of the company and protects them from purchases of shares by outside parties. Overall, the right of first refusal gives shareholders an element of control over the company’s ownership and protects the company from infiltration by unwanted outside parties.
Pre-emptive Rights
Pre-emptive rights are similar to the right of first refusal. These rights protect the rights of shareholders in situations where a company decides to sell newly issued shares to a third party. This type of clause allows existing shareholders to purchase new shares before they are sold to outside parties and consequently retain their existing percentage in the company.
Non-Compete Clause
Another important clause in a shareholder agreement is called a non-compete clause. This type of clause protects the company and its shareholders from unfair competition should an existing shareholder decide to leave the company. Specifically, a non-compete clause states that a party to the agreement will not offer the same or similar services in competition against the company for a prescribed period of time after leaving the organization. And although non-compete clauses are relatively common, most states have strict limitations on their enforceability. For example, most states limit the amount of time such clauses remain enforceable and place limits on their geographic scope.
Non-Solicitation Clause
Finally, a non-solicitation clause is another common shareholder agreement provision. A non-solicitation clause prevents shareholders or ex-shareholders from convincing the directors, officers, employees, or other shareholders of a corporation to leave the corporation or to compete against it. However, unlike a non-compete clause, a non-solicitation clause does not apply to a specific geographic area or only pertain to certain services or products. In addition, a non-solicitation clause does not restrict a former principal of the company from working for a competitor.
Contact a Florida Corporate and Business Law Attorney
When drafting a shareholder agreement, the most important thing you can do is work with an experienced attorney. With an experienced corporate and business law attorney on your side, you can rest assured that your shareholder agreement will be effective and legally enforceable. At Gueronniere, P.A., we are passionate about helping businesses achieve their goals. So, when you come to us for assistance with drafting your shareholder agreement, experienced corporate and business law attorney Grace de la Gueronniere will work diligently to ensure that your legal needs are met. Please contact us to arrange a confidential consultation with our experienced Florida corporate and business law attorney.