Archive for September, 2007
Problems among shareholders often could have been avoided had they simply signed a better shareholder agreement at the outset of the relationship. When shareholders want a “divorce,” they often look to the shareholders agreement to define their respective rights and obligations. Far too often, when I ask clients what their shareholders’ agreement says about buying out the other, or being bought out themselves, they have no idea what the document says. It is obvious that these clients paid little attention to what the agreement said at the time it was drafted.
Even if you did pay attention, and a share valuation formula seemed to make sense to you when the agreement was drafted several years ago, did you stop to think whether that formula might make sense in ten years? Now that you want nothing more than to separate from your business partner, do you regret the fact that you have not reviewed your agreement in all this intervening time? After reading your agreement for the first time in a decade, are you one of the countless shareholders who would get a fraction of what you think your shares are worth?