Last Updated on June 25, 2025 by Bertrand Clarke

Below is a FREE comprehensive small business shareholder agreement template that covers all the essential provisions typically needed for small business arrangements.

SHAREHOLDER AGREEMENT

[COMPANY NAME], INC.

This Shareholder Agreement (“Agreement”) is entered into as of [DATE], by and among [COMPANY NAME], Inc., a [STATE] corporation (the “Company”), and the undersigned shareholders of the Company (each a “Shareholder” and collectively the “Shareholders”).

RECITALS

WHEREAS, the Company is a corporation organized and existing under the laws of [STATE];

WHEREAS, the Shareholders are the owners of all of the issued and outstanding shares of capital stock of the Company;

WHEREAS, the parties desire to establish certain rights, restrictions, and obligations with respect to the shares of the Company and the management and operation of the Company;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

1. DEFINITIONS

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person.

“Board” means the Board of Directors of the Company.

“Drag-Along Sale” has the meaning set forth in Section 8.

“Fair Market Value” means the value of the Shares as determined in accordance with Section 9.

“Permitted Transfer” means any transfer of Shares that is expressly permitted under this Agreement.

“Person” means an individual, corporation, partnership, limited liability company, trust, or other entity.

“Shares” means shares of capital stock of the Company, including common stock and preferred stock.

“Tag-Along Sale” has the meaning set forth in Section 7.

“Transfer” means any sale, assignment, transfer, conveyance, hypothecation, or other disposition of Shares, whether voluntary or involuntary.

2. SHARE OWNERSHIP AND CAPITALIZATION

2.1 Current Ownership

The current ownership of the Company’s issued and outstanding Shares is as follows:

Shareholder Name	Number of Shares	Percentage Ownership	Class of Stock
[NAME 1]	[NUMBER]	[PERCENTAGE]%	Common
[NAME 2]	[NUMBER]	[PERCENTAGE]%	Common
[NAME 3]	[NUMBER]	[PERCENTAGE]%	Common

2.2 Share Certificates

All Shares shall be represented by certificates bearing a legend referencing the restrictions set forth in this Agreement.

3. BOARD OF DIRECTORS

3.1 Composition

The Board shall consist of [NUMBER] directors. Each Shareholder holding [PERCENTAGE]% or more of the outstanding Shares shall have the right to designate one director for election to the Board.

3.2 Board Meetings

The Board shall meet at least [FREQUENCY] and may meet more frequently as business requires. [PERCENTAGE]% of the directors shall constitute a quorum for Board meetings.

3.3 Board Approval Requirements

The following actions shall require the unanimous approval of the Board:

• Annual operating and capital budgets exceeding $[AMOUNT]
• Individual expenditures exceeding $[AMOUNT]
• Borrowing money in excess of $[AMOUNT]
• Entering into contracts with terms exceeding [TIME PERIOD] or value exceeding $[AMOUNT]
• Hiring or terminating key employees earning more than $[AMOUNT] annually
• Creating or modifying employee benefit plans
• Any merger, acquisition, or sale of substantially all assets

4. SHAREHOLDER APPROVAL REQUIREMENTS

4.1 Supermajority Actions

The following actions shall require the approval of Shareholders holding at least [PERCENTAGE]% of the outstanding Shares:

• Amendment of the Company’s Articles of Incorporation or Bylaws
• Issuance of additional Shares or securities convertible into Shares
• Any merger, consolidation, or sale of all or substantially all assets
• Dissolution or liquidation of the Company
• Amendment of this Agreement

4.2 Shareholder Meetings

Annual shareholder meetings shall be held [TIMING]. Special meetings may be called by [DESIGNATION OF WHO CAN CALL].

5. RESTRICTIONS ON TRANSFER

5.1 General Restriction

No Shareholder may Transfer any Shares except in accordance with this Agreement.

5.2 Permitted Transfers

The following Transfers are permitted without restriction:

• Transfers to Affiliates of the Shareholder
• Transfers to family members or trusts for estate planning purposes
• Transfers pursuant to a court order in connection with divorce proceedings

5.3 Right of First Refusal

Before any Shareholder may Transfer Shares to a third party, the transferring Shareholder must first offer such Shares to the Company and then to the other Shareholders on the same terms and conditions as offered by the third party.

5.3.1 Notice of Proposed Transfer

The transferring Shareholder shall provide written notice (“Transfer Notice”) to the Company and all other Shareholders containing:

• The number and class of Shares to be transferred
• The identity of the proposed transferee
• The purchase price and terms of the proposed transfer
• A copy of any written offer or agreement

5.3.2 Company’s Right

The Company shall have [NUMBER] days after receipt of the Transfer Notice to elect to purchase all (but not less than all) of the offered Shares at the price and terms specified in the Transfer Notice.

5.3.3 Shareholders’ Right

If the Company does not exercise its right of first refusal, the other Shareholders shall have [NUMBER] days to elect to purchase the offered Shares pro rata based on their relative ownership percentages.

5.3.4 Completion of Third Party Sale

If neither the Company nor the other Shareholders elect to purchase the offered Shares, the transferring Shareholder may complete the sale to the third party within [NUMBER] days on terms no more favorable than those specified in the Transfer Notice.

6. BUY-SELL PROVISIONS

6.1 Involuntary Transfer Events

Upon the occurrence of any of the following events with respect to a Shareholder (“Departing Shareholder”), the Company or the remaining Shareholders shall have the option to purchase all Shares owned by the Departing Shareholder:

• Death of the Shareholder
• Permanent disability of the Shareholder
• Termination of employment with the Company for cause
• Resignation from employment with the Company
• Bankruptcy or insolvency of the Shareholder

6.2 Exercise of Purchase Option

The purchase option must be exercised by written notice within [NUMBER] days after the occurrence of the triggering event.

6.3 Purchase Price

The purchase price shall be the Fair Market Value of the Shares as determined under Section 9.

6.4 Payment Terms

The purchase price shall be paid:

• [PERCENTAGE]% in cash at closing
• The remainder in [NUMBER] equal annual installments with interest at [RATE]% per annum

7. TAG-ALONG RIGHTS

7.1 Tag-Along Right

If any Shareholder holding [PERCENTAGE]% or more of the outstanding Shares proposes to Transfer Shares to a third party, the other Shareholders shall have the right to participate in such sale on a pro rata basis (“Tag-Along Sale”).

7.2 Tag-Along Notice

The selling Shareholder shall provide [NUMBER] days written notice to all other Shareholders of the proposed Tag-Along Sale, including the terms and conditions of the sale.

7.3 Exercise of Tag-Along Right

Other Shareholders may exercise their tag-along rights by providing written notice within [NUMBER] days after receiving the Tag-Along Notice.

8. DRAG-ALONG RIGHTS

8.1 Drag-Along Right

If Shareholders holding [PERCENTAGE]% or more of the outstanding Shares approve a sale of the Company to a third party, they may require all other Shareholders to participate in such sale (“Drag-Along Sale”).

8.2 Drag-Along Notice

The majority Shareholders shall provide [NUMBER] days written notice to all other Shareholders of the proposed Drag-Along Sale.

8.3 Conditions

All Shareholders shall receive the same price per Share and the same terms and conditions in any Drag-Along Sale.

9. VALUATION

9.1 Determination of Fair Market Value

Fair Market Value shall be determined as follows:

1. The parties may mutually agree on Fair Market Value within [NUMBER] days
2. If no agreement is reached, each party shall select a qualified appraiser
3. If the two appraisals differ by less than [PERCENTAGE]%, Fair Market Value shall be the average
4. If the two appraisals differ by [PERCENTAGE]% or more, the appraisers shall select a third appraiser, and Fair Market Value shall be the average of the two closest appraisals

9.2 Appraisal Standards

All appraisals shall be conducted by certified business appraisers using generally accepted valuation methods and shall consider appropriate discounts for minority interest and lack of marketability.

10. NON-COMPETE AND NON-SOLICITATION

10.1 Non-Compete

During the term of this Agreement and for [TIME PERIOD] following any Transfer of Shares or termination of employment, each Shareholder agrees not to engage in any business that directly competes with the Company’s business within [GEOGRAPHIC AREA].

10.2 Non-Solicitation

Each Shareholder agrees not to solicit or hire any employee of the Company for [TIME PERIOD] following any Transfer of Shares or termination of employment.

10.3 Customer Non-Solicitation

Each Shareholder agrees not to solicit customers of the Company for [TIME PERIOD] following any Transfer of Shares or termination of employment.

11. CONFIDENTIALITY

11.1 Confidential Information

Each Shareholder acknowledges access to confidential and proprietary information of the Company and agrees to maintain such information in strict confidence.

11.2 Return of Information

Upon any Transfer of Shares or termination of relationship with the Company, each Shareholder shall return all confidential information and materials.

12. EMPLOYMENT MATTERS

12.1 Key Employee Status

The following Shareholders are considered key employees: [LIST NAMES]

12.2 Employment Agreements

Key employee Shareholders shall enter into employment agreements with terms consistent with this Agreement.

12.3 Compensation

Shareholder compensation shall be determined by the Board, excluding any interested directors from the vote.

13. DISPUTE RESOLUTION

13.1 Mediation

Any dispute arising under this Agreement shall first be submitted to mediation with a qualified mediator acceptable to all parties.

13.2 Arbitration

If mediation is unsuccessful, disputes shall be resolved through binding arbitration under the rules of the American Arbitration Association.

13.3 Governing Law

This Agreement shall be governed by the laws of [STATE].

14. DEADLOCK RESOLUTION

14.1 Deadlock Defined

A deadlock exists when the Board or Shareholders cannot reach agreement on a material decision after [NUMBER] meetings over [TIME PERIOD].

14.2 Resolution Procedures

In case of deadlock:

1. The parties shall engage in good faith negotiations for [TIME PERIOD]
2. If unsuccessful, the matter shall be submitted to mediation
3. As a last resort, any Shareholder may initiate buy-sell procedures under Section 6

15. ADDITIONAL PROVISIONS

15.1 Life Insurance

The Company may purchase life insurance on key Shareholders to fund buy-sell obligations upon death.

15.2 Right to Information

Each Shareholder shall have the right to inspect corporate books and records and receive regular financial statements.

15.3 Preemptive Rights

Shareholders shall have preemptive rights to purchase their pro rata share of any new equity securities issued by the Company.

15.4 Anti-Dilution Protection

[Include specific anti-dilution provisions if applicable]

16. GENERAL PROVISIONS

16.1 Term

This Agreement shall remain in effect until terminated by mutual consent of all Shareholders or upon dissolution of the Company.

16.2 Amendment

This Agreement may only be amended by written agreement signed by all Shareholders.

16.3 Severability

If any provision is deemed invalid or unenforceable, the remainder of the Agreement shall remain in full force and effect.

16.4 Entire Agreement

This Agreement constitutes the entire agreement among the parties and supersedes all prior agreements and understandings.

16.5 Counterparts

This Agreement may be executed in counterparts, each of which shall be deemed an original.

16.6 Notices

All notices shall be in writing and delivered by certified mail, personal delivery, or email to the addresses specified in Schedule A.

16.7 Binding Effect

This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, successors, and assigns.

16.8 Legal Fees

In any dispute, the prevailing party shall be entitled to recover reasonable attorney’s fees and costs.

SCHEDULE A – SHAREHOLDER INFORMATION

Shareholder	Address	Email	Phone
[NAME 1]	[ADDRESS]	[EMAIL]	[PHONE]
[NAME 2]	[ADDRESS]	[EMAIL]	[PHONE]
[NAME 3]	[ADDRESS]	[EMAIL]	[PHONE]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

[COMPANY NAME], INC.

By: _________________________________ Name: [NAME] Title: President

SHAREHOLDERS:

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[SHAREHOLDER NAME 1]

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[SHAREHOLDER NAME 2]

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[SHAREHOLDER NAME 3]

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IMPORTANT LEGAL NOTICE: This template is provided for informational purposes only and does not constitute legal advice. Shareholder agreements involve complex legal issues that vary by jurisdiction and specific circumstances. You should consult with a qualified attorney to ensure the agreement meets your specific needs and complies with applicable laws. Consider having the agreement reviewed by legal counsel before execution.