A shareholder agreement
establishes the terms, duties, responsibilities, rights, and privileges of the shareholders of a South Carolina corporation
. It aims to protect the shareholders’ investments in the corporation. It sets out the shareholders’ rights and responsibilities, regulates the sale of corporate shares; and describes how the corporation will operate. Moreover, it provides an element of protection for the minority shareholders and outlines the decision-making process including how important decisions will be made.
A well-drafted shareholder agreement aims at ensuring that the corporation will run efficiently and that shareholders’ responsibilities are accounted for. The provisions of the shareholder agreement provide certainty to decision-making questions, duties, and rights; and reduce the chances of destructive conflict between shareholders. A shareholder agreement works with the company’s articles of incorporation and corporate bylaws but should provide the shareholders more protection than these other documents because it is comprehensive, highly negotiated and includes operational details and provisions that limit shareholder’s responsibilities.