A governance agreement generally refers to a shareholders’ agreement which lays down the terms and conditions to be followed by the shareholders and the management of the company. A proper agreement is necessary because it helps save a lot of confusion and conflict in the light of one of the major shareholders exiting the company or if they are related and want to sell their shares.
Good governance agreements deals with the internal structure of the company, other governing issues like financial control, creation of company policies and clearly mentions the obligations of the shareholders and the management. Some other areas covered by this agreement refer to the sale and transfer of stakeholder’s interests, the general management of the company and how to resolve disputes among the shareholders. This agreement is extremely helpful as it already assesses the possibility of conflicts, expansion and restructuring and lays down the terms on how to deal with them.
[Also Read: Shareholders’ Rights Agreement].
Sample for Governance Agreement
A sample of the agreement can be downloaded from below.