“We’re friends. We don’t need a legal agreement.” Famous last words.

Many startups collapse not because of the idea — but because of founder disputes. That’s where a Shareholders’ Agreement (SHA) comes in. It’s not about distrust. It’s about clarity.

🧾 What is a Shareholders’ Agreement?

It’s a binding document between the shareholders of a company that defines: ✔ Rights ✔ Responsibilities ✔ Exit terms

Think of it as a “founder rulebook” for tough times.

📌 Why Your Startup Needs One

1. Clarity on Roles & Responsibilities

Founders often assume “we’ll figure it out later.” An SHA defines decision-making rights, voting powers, and board composition.

2. Equity & Dilution Protection

It ensures existing founders aren’t blindsided by unexpected dilution when new investors come in.

3. Exit & Buyout Terms

What happens if a co-founder wants to leave? An SHA defines valuation methods and exit clauses to avoid messy disputes.

4. Dispute Resolution

Instead of ending in court, disputes can be solved via arbitration/mediation as defined in the SHA.

5. Investor Confidence

Serious investors look for a clean SHA before writing cheques. No agreement = 🚩 red flag.

Common Clauses in a Startup SHA

• Right of First Refusal (ROFR): Existing shareholders get first right to buy if someone exits

• Drag-Along Rights: Majority can force minority to sell in case of acquisition

• Tag-Along Rights: Minority can join majority if they sell

• Vesting Schedules: Protects against co-founders leaving too early

• Non-Compete Clauses: Founders can’t jump ship and start a competitor overnight

🎯 Final Thought

An SHA doesn’t replace trust — it protects it. It’s not about “what if things go wrong.” It’s about making sure your startup survives even if they do.

At CFO Emeritus, we help startups set up the right financial & legal frameworks — including guidance on drafting SHA alongside your legal team.

📩 Need help setting up your startup’s structure and shareholder alignment? Write to us at office@cfoemeritus.com