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Considerations of the agreement?
Despite shareholders’ agreements carrying with them many advantages, several issues could present themselves.
- Negotiations. Shareholders’ agreements take time and negotiation to be agreed upon. The parties will need to think about the different scenarios that the agreement should cover. Some may seem this as ‘preparing to fail’. However, even this consideration can be favourable. The time spent agreeing on the terms can avoid costly issues at a later date.
- Inaccurate requirements. Improper or inaccurate delivery of requirements in the drafting of the agreement can cause severe problems. For example, suppose the agreement is necessary to detail with some requirements. In that case, it can result in fierce disputes in the future. For instance, if the agreement states that money is to be paid regularly to shareholders but doesn’t include a time-frame for ‘regularly’, it may cause future disputes.
- Improperly drafted and reviewed. Suppose the shareholder agreement isn’t correctly drafted, reviewed, or undergone extensive amendments. In that case, you may be agreeing to unfair terms and conditions when you sign.