New Jersey Shareholders' Agreement with Special Allocation of Dividends among Shareholders in a Close Corporation

• Category: Corporations - Shareholders and Stock
• State: Multi-State
• Control #: US-1085BG
• Format: Word; Rich Text

Description

A corporation whose shares are held by a single shareholder or a closely-knit group of shareholders (such as a family) is known as a close corporation. The shares of stock are not traded publicly. A shareholders' agreement may contain provisions relating to any phase of the affairs of a close corporation. Statutes often provide that the agreement may, as between the parties to the agreement, alter or waive the provisions of the general corporation law except those provisions that are specifically exempt from such alteration or waiver. A shareholders' agreement may not be altered or terminated except as provided by the agreement, or by all the parties, or by operation of law. A New Jersey Shareholders' Agreement with Special Allocation of Dividends among Shareholders in a Close Corporation is a legally binding document that outlines the rules and arrangements among shareholders in a closely-held corporation located in New Jersey. It defines how dividends are allocated and distributed among the shareholders based on specific criteria agreed upon by them. This agreement can be categorized into two main types: 1. Pro Rata Shareholders' Agreement: This type of agreement provides for the equal distribution of dividends among shareholders based on their proportionate ownership in the corporation. Each shareholder's dividend entitlement is determined by the percentage of shares they hold in the company. For example, if there are two shareholders with a 50% ownership stake each, they would be entitled to receive 50% of the dividends allocated. 2. Special Allocation Shareholders' Agreement: This type of agreement allows for the allocation of dividends in ways other than pro rata based on the shareholders' ownership percentage. It enables shareholders to agree upon specific criteria for dividend distribution. This can include factors such as performance, contribution to the company, seniority, or any other metric deemed appropriate by the shareholders. For instance, if a shareholder has made significant contributions to the corporation's growth or played a vital role in securing new contracts, they may be entitled to a higher allocation of dividends. Key terms and considerations commonly included in a New Jersey Shareholders' Agreement with Special Allocation of Dividends among Shareholders in a Close Corporation may include: 1. Shareholder Rights: The agreement should outline each shareholder's right to receive dividends as well as the mechanisms for allocation and distribution. 2. Dividend Allocation Criteria: The agreement should clearly define the criteria used to determine how dividends are allocated among shareholders. This can include factors such as ownership percentage, performance, contribution, or other agreed-upon metrics. 3. Dividend Restrictions: The agreement may specify any restrictions on dividend payments, such as the requirement for the corporation to maintain a certain level of retained earnings before distributing dividends. 4. Dividend Timelines: The agreement should outline the frequency and timing of dividend distributions, which can be on a quarterly, semi-annual, or annual basis. 5. Dispute Resolution: The agreement should establish mechanisms for resolving any disputes or disagreements that may arise regarding dividend allocations among shareholders, such as mediation or arbitration. 6. Termination and Amendment: The agreement should indicate the conditions under which the agreement can be terminated or amended, ensuring that shareholders have a fair and transparent process for making changes if necessary. 7. Legal Compliance: The agreement should ensure compliance with the relevant laws and regulations of New Jersey regarding dividend allocations in closely-held corporations. In conclusion, a New Jersey Shareholders' Agreement with Special Allocation of Dividends among Shareholders in a Close Corporation provides a framework for shareholders to allocate dividends based on specific criteria agreed upon by them. It enhances transparency, promotes fairness, and allows shareholders to customize dividend distributions to align with their individual circumstances and contributions to the corporation's success.

A New Jersey Shareholders' Agreement with Special Allocation of Dividends among Shareholders in a Close Corporation is a legally binding document that outlines the rules and arrangements among shareholders in a closely-held corporation located in New Jersey. It defines how dividends are allocated and distributed among the shareholders based on specific criteria agreed upon by them. This agreement can be categorized into two main types: 1. Pro Rata Shareholders' Agreement: This type of agreement provides for the equal distribution of dividends among shareholders based on their proportionate ownership in the corporation. Each shareholder's dividend entitlement is determined by the percentage of shares they hold in the company. For example, if there are two shareholders with a 50% ownership stake each, they would be entitled to receive 50% of the dividends allocated. 2. Special Allocation Shareholders' Agreement: This type of agreement allows for the allocation of dividends in ways other than pro rata based on the shareholders' ownership percentage. It enables shareholders to agree upon specific criteria for dividend distribution. This can include factors such as performance, contribution to the company, seniority, or any other metric deemed appropriate by the shareholders. For instance, if a shareholder has made significant contributions to the corporation's growth or played a vital role in securing new contracts, they may be entitled to a higher allocation of dividends. Key terms and considerations commonly included in a New Jersey Shareholders' Agreement with Special Allocation of Dividends among Shareholders in a Close Corporation may include: 1. Shareholder Rights: The agreement should outline each shareholder's right to receive dividends as well as the mechanisms for allocation and distribution. 2. Dividend Allocation Criteria: The agreement should clearly define the criteria used to determine how dividends are allocated among shareholders. This can include factors such as ownership percentage, performance, contribution, or other agreed-upon metrics. 3. Dividend Restrictions: The agreement may specify any restrictions on dividend payments, such as the requirement for the corporation to maintain a certain level of retained earnings before distributing dividends. 4. Dividend Timelines: The agreement should outline the frequency and timing of dividend distributions, which can be on a quarterly, semi-annual, or annual basis. 5. Dispute Resolution: The agreement should establish mechanisms for resolving any disputes or disagreements that may arise regarding dividend allocations among shareholders, such as mediation or arbitration. 6. Termination and Amendment: The agreement should indicate the conditions under which the agreement can be terminated or amended, ensuring that shareholders have a fair and transparent process for making changes if necessary. 7. Legal Compliance: The agreement should ensure compliance with the relevant laws and regulations of New Jersey regarding dividend allocations in closely-held corporations. In conclusion, a New Jersey Shareholders' Agreement with Special Allocation of Dividends among Shareholders in a Close Corporation provides a framework for shareholders to allocate dividends based on specific criteria agreed upon by them. It enhances transparency, promotes fairness, and allows shareholders to customize dividend distributions to align with their individual circumstances and contributions to the corporation's success.