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Practice

Practice

Technology - Shareholder Agreements

All business partnerships start out with good intentions. As time goes by and challenges begin to strain the business, one of the biggest threats to the stability of a business is disagreements within management and/or among shareholders. Internal disputes can be as costly as major litigation and far more devastating. Bitter disputes among owners can demoralize the organization, stifle growth, and use up the company's assets. If a dispute ends up going to court, the litigation can be extremely costly - emotionally and financially. In addition, judicial and legislative remedies are often limited and inequitable. Worst case, protracted court battles can drain a company of all of its assets and render it insolvent.

A good shareholder agreement is the most significant building block on which to found the business since a strong agreement is essential to helping the business run smoothly. A shareholder agreement dealing with voting rights is typically an agreement by which the parties have agreed to vote their shares in a particular manner and/or to provide for proxies which would allow the shares to be voted in a particular manner. A shareholder agreement may also attempt to grant other rights to the parties with respect to the shares held by them. These rights may include limiting share transfers and providing for certain pre-emptive rights, such as rights of first refusal. 

We establish shareholder agreements that eliminate later disputes by, among other matters, providing the company rights to purchase stock from departing shareholders - or departing owners rights to sell their stock - at prices set by objective formulas. We assist our clients in deciding what business structure is most appropriate for each transaction, and in the formation of those business entities. Additionally, we prepare buy-sell agreements, confidentiality agreements, employment agreements, deeds of trust and other documents necessary for the efficient management and operation of those business vehicles. We counsel our clients on how to avoid litigation and manage risk in planning new business initiatives which have a litigation risk component. We also provide confidential counseling on how to coordinate legal concerns with effective business plan implementation, media relations, or governmental scrutiny, particularly in relation to technology start-ups.