Rhode Island Shareholders' Agreement between Two Shareholders of Closely Held Corporation with Buy Sell Provisions

• Category: Corporations - Shareholders and Stock
• State: Multi-State
• Control #: US-02569BG
• 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. Many of these types of corporations are small firms that in the past would have been operated as a sole proprietorship or partnership, but have been incorporated in order to obtain the advantages of limited liability or a tax benefit or both. A buy-sell agreement is an agreement between the owners (shareholders) of a firm, defining their mutual obligations, privileges, protections, and rights. This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction. A Rhode Island Shareholders' Agreement between Two Shareholders of a Closely Held Corporation with Buy-Sell Provisions is a legally binding contract that governs the relationship and ownership rights between the two shareholders of a closely held corporation in the state of Rhode Island. This agreement outlines various provisions that address key aspects of their ownership, decision-making, and potential future scenarios. Keywords: Rhode Island, shareholders' agreement, closely held corporation, buy-sell provisions, contract, relationship, ownership rights, decision-making, future scenarios. The purpose of a Rhode Island Shareholders' Agreement is to establish a clear framework for how the shareholders will work together and resolve potential disputes in their closely held corporation. It serves as a comprehensive guide to protect the interests of each shareholder, ensure fairness, and establish guidelines for the future growth and stability of the corporation. Buy-sell provisions, also known as buyout or exit provisions, are essential components of this type of agreement. They provide mechanisms for shareholders to buy or sell their shares under predetermined circumstances, such as death, disability, retirement, or voluntary departure. These provisions help maintain the continuity and stability of the corporation in the event of unexpected or planned shareholder departures. There can be different types of Rhode Island Shareholders' Agreements between Two Shareholders of Closely Held Corporations with Buy-Sell Provisions, each tailored to the specific needs and preferences of the shareholders. Some common variations or additional clauses that may be included are: 1. Fixed Price Agreement: This type of agreement establishes a predetermined price for share transfer upon triggering events, eliminating the need for further negotiation. 2. Shotgun Agreement: In a shotgun agreement, one shareholder sets a price at which they are willing to buy or sell their shares. The other shareholder can then either accept the offer or counterpropose an alternative price. If an agreement cannot be reached, one shareholder must buy the other shareholder's shares at the initial price proposed. 3. Rights of First Refusal: This provision grants existing shareholders the right to purchase any shares being offered for sale by a departing shareholder. It ensures that the existing shareholders have the first opportunity to maintain or increase their ownership stakes. 4. Drag-Along and Tag-Along Rights: These provisions protect the interests of minority shareholders. Drag-along rights enable majority shareholders to compel minority shareholders to sell their shares in the event of a sale to a third party, while tag-along rights allow minority shareholders to include their shares in a sale initiated by majority shareholders. Other important clauses that may be included in a Rhode Island Shareholders' Agreement with buy-sell provisions are share valuation methods, dispute resolution mechanisms (such as mediation or arbitration), non-compete and non-solicitation agreements, dividend distribution policies, confidentiality obligations, and restrictions on share transfer to third parties. It is important for shareholders to consult with legal professionals to ensure that their Shareholders' Agreement complies with Rhode Island laws and adequately addresses their specific needs and circumstances.

A Rhode Island Shareholders' Agreement between Two Shareholders of a Closely Held Corporation with Buy-Sell Provisions is a legally binding contract that governs the relationship and ownership rights between the two shareholders of a closely held corporation in the state of Rhode Island. This agreement outlines various provisions that address key aspects of their ownership, decision-making, and potential future scenarios. Keywords: Rhode Island, shareholders' agreement, closely held corporation, buy-sell provisions, contract, relationship, ownership rights, decision-making, future scenarios. The purpose of a Rhode Island Shareholders' Agreement is to establish a clear framework for how the shareholders will work together and resolve potential disputes in their closely held corporation. It serves as a comprehensive guide to protect the interests of each shareholder, ensure fairness, and establish guidelines for the future growth and stability of the corporation. Buy-sell provisions, also known as buyout or exit provisions, are essential components of this type of agreement. They provide mechanisms for shareholders to buy or sell their shares under predetermined circumstances, such as death, disability, retirement, or voluntary departure. These provisions help maintain the continuity and stability of the corporation in the event of unexpected or planned shareholder departures. There can be different types of Rhode Island Shareholders' Agreements between Two Shareholders of Closely Held Corporations with Buy-Sell Provisions, each tailored to the specific needs and preferences of the shareholders. Some common variations or additional clauses that may be included are: 1. Fixed Price Agreement: This type of agreement establishes a predetermined price for share transfer upon triggering events, eliminating the need for further negotiation. 2. Shotgun Agreement: In a shotgun agreement, one shareholder sets a price at which they are willing to buy or sell their shares. The other shareholder can then either accept the offer or counterpropose an alternative price. If an agreement cannot be reached, one shareholder must buy the other shareholder's shares at the initial price proposed. 3. Rights of First Refusal: This provision grants existing shareholders the right to purchase any shares being offered for sale by a departing shareholder. It ensures that the existing shareholders have the first opportunity to maintain or increase their ownership stakes. 4. Drag-Along and Tag-Along Rights: These provisions protect the interests of minority shareholders. Drag-along rights enable majority shareholders to compel minority shareholders to sell their shares in the event of a sale to a third party, while tag-along rights allow minority shareholders to include their shares in a sale initiated by majority shareholders. Other important clauses that may be included in a Rhode Island Shareholders' Agreement with buy-sell provisions are share valuation methods, dispute resolution mechanisms (such as mediation or arbitration), non-compete and non-solicitation agreements, dividend distribution policies, confidentiality obligations, and restrictions on share transfer to third parties. It is important for shareholders to consult with legal professionals to ensure that their Shareholders' Agreement complies with Rhode Island laws and adequately addresses their specific needs and circumstances.