The purpose of a shareholder agreement is to set out certain rights and responsabilities of the company’s shareholders, to provide for the ongoing governance of the company’s business. Many company actions are addressed in a shareholder agreement. These actions can include starting up the company, dealing with company employees, implementing a business succession plan, or obtaining equity financing. Schumpeter reckons there are six distinct corporate tribes, each with its own interpretation of what shareholder value means.
Regardless of the many different circumstances in which a shareholder agreement may be useful, it is usually put into place because the shareholders anticipate problems which might arise in the future. They use them to implement certain practices to deter such problems from arising at all. Some of these problems relate to control and management, others relate to financing and conflicts of interest, while others relate to the possible abuse of power by the majority shareholder. In the absence of a unanimous shareholder agreement, the ability of shareholders to control a private company is generally limited in practice to their power to elect and remove directors.
It is the directors who have the fundamental power and duty to manage the company unless restricted by a unanimous shareholder agreement.Considering foregoing, shareholder’s play an important role in the financing, operations, governance and control aspects of a business.