A stockholders agreement is a legally binding arrangement between a prospective shareholder and a closely held company enacted when the investors purchase stock with the company or perhaps other securities. While investing in any closely knit organization, stockholders generally enter into an agreement acquiring specific rights with respect to conduct of the company, especially where amount of investment amounts to a minority stake in the business.
The Stockholders Agreement covers almost all aspects, which include shareholder’s facts and statement rights, subscription rights, Rights of First offer, Inspection and several other concerns. Large shareholders try to negotiate some specific rights including the right to be able to elect one or more of their directors as well as the right to be involved in any share transactions by the founding directors of the company. The effective usage of stockholders Agreement can facilitate a corporation to make a prospective investor feel safe enough to purchase a stake in a closely knit business that will otherwise struggle to attract growth funding.
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