Shareholders' agreement

How it is used

Usually signed when investors join, based on the term sheet. Common clauses include pre-emption rights, drag-along and tag-along rights, and good leaver and bad leaver rules. Often shortened to SHA in Europe; US deals usually split these terms across several documents.

Example sentences

1. The shareholders' agreement gives our seed investors the right to join future rounds.

2. The lawyers spent two weeks on the drag-along clause in the shareholders' agreement.

Common collocations

• sign a shareholders' agreement
• drag-along right
• tag-along right
• pre-emption rights

Related terms

• term sheetA short document that lists the main terms of a proposed investment, such as the amount, valuation and investor rights, before the final legal contracts are written.
• founders' agreementA written contract between co-founders that sets out who owns what, who does what, how decisions are made and what happens if someone leaves.
• liquidation preferenceA term that gives investors the right to get their money back, or a multiple of it, before other shareholders when the company is sold or closed.
• board of directorsA group of people elected to oversee a company's management and make major decisions, such as approving budgets, fundraising, key hires and the sale of the company.

More terms: Legal Setup & Governance

• incorporate
• limited liability company
• intellectual property
• NDA