Shareholders Agreement
A contract between shareholders governing transfers, voting, and other shareholder interactions.
Definition
A shareholders agreement (SHA) is a contract among the company and its shareholders that governs share transfers, voting arrangements, drag-along and tag-along rights, ROFR provisions, and other shareholder rights. It is separate from the articles of incorporation and provides additional protections and restrictions beyond what corporate law requires. Most venture deals include an SHA as part of the closing documents.
Why it matters
The shareholders agreement contains the transfer restrictions and ROFR provisions that affect your ability to sell shares on the secondary market. It also defines drag-along and tag-along rights that protect (or constrain) you in an exit.
Example
A shareholders agreement specifies that any employee wanting to sell shares must first offer them to the company (ROFR, 30 days), then to existing investors (ROFR, 15 days). Only if both pass can the employee sell to an outside buyer.