## Shareholders Agreement for VG Foods

### Table of Contents

1. Introduction
2. Definitions
3. Share Capital and Shareholding
4. Management and Board of Directors
5. Rights and Obligations of Shareholders
6. Transfer of Shares
7. Preference Shares
8. Protection of Founders
9. Dispute Resolution
10. Termination
11. Miscellaneous Provisions

### 1. Introduction

This Shareholders Agreement ("Agreement") is made and entered into as of [Date], by and among VG Foods Limited, a company incorporated under the laws of Kenya (the "Company"), and the following shareholders (collectively, the "Shareholders"):

- [Name of Shareholder 1]
- [Name of Shareholder 2]
- [Name of Shareholder 3]

WHEREAS, the Shareholders wish to set forth their respective rights and obligations as shareholders of the Company;

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:

### 2. Definitions

**2.1 "Act"** means the Companies Act, 2015 of Kenya, as amended from time to time.

**2.2 "Board"** means the Board of Directors of the Company.

**2.3 "Shares"** means the ordinary shares and preference shares of the Company.

**2.4 "Founder Shareholders"** means [Name of Shareholder 1] and [Name of Shareholder 2].

**2.5 "New Shareholder"** means any person who acquires shares in the Company after the date of this Agreement.

### 3. Share Capital and Shareholding

**3.1 Share Capital**: The authorized share capital of the Company is KES [Amount], divided into [Number] ordinary shares of KES [Amount] each and [Number] preference shares of KES [Amount] each.

**3.2 Initial Shareholding**: The initial shareholding of the Company is as follows:

- [Name of Shareholder 1]: [Number] ordinary shares
- [Name of Shareholder 2]: [Number] ordinary shares
- [Name of Shareholder 3]: [Number] ordinary shares

### 4. Management and Board of Directors

**4.1 Board Composition**: The Board shall consist of [Number] directors. The Founder Shareholders shall have the right to appoint [Number] directors.

**4.2 Quorum**: The quorum for Board meetings shall be [Number] directors, including at least one director appointed by the Founder Shareholders.

**4.3 Decision Making**: Decisions of the Board shall be made by a majority vote, provided that any decision affecting the rights of the Founder Shareholders shall require the affirmative vote of at least one director appointed by the Founder Shareholders.

### 5. Rights and Obligations of Shareholders

**5.1 Voting Rights**: Each ordinary share shall carry one vote. Preference shares shall carry such voting rights as specified in Clause 7.

**5.2 Dividends**: Dividends shall be distributed in accordance with the number of shares held by each shareholder, subject to the rights of preference shareholders as specified in Clause 7.

**5.3 Information Rights**: Each shareholder shall have the right to receive financial statements and other information relating to the Company's business and affairs.

### 6. Transfer of Shares

**6.1 Restrictions on Transfer**: No shareholder shall transfer any shares without the prior written consent of the Board, which consent shall not be unreasonably withheld.

**6.2 Right of First Refusal**: If a shareholder wishes to transfer any shares, the other shareholders shall have a right of first refusal to purchase such shares on the same terms and conditions.

**6.3 Tag-Along Rights**: If a shareholder proposes to transfer shares to a third party, the other shareholders shall have the right to participate in such transfer on a pro-rata basis.

### 7. Preference Shares

**7.1 Issuance**: The Company may issue preference shares with such rights, preferences, privileges, and restrictions as the Board may determine.

**7.2 Dividend Rights**: Preference shareholders shall be entitled to receive dividends at a rate of [Percentage]% per annum, payable in priority to dividends on ordinary shares.

**7.3 Liquidation Preference**: In the event of liquidation, preference shareholders shall be entitled to receive, in priority to ordinary shareholders, an amount equal to the original issue price of the preference shares plus any accrued but unpaid dividends.

### 8. Protection of Founders

**8.1 Vesting of Shares**: The shares held by the Founder Shareholders shall be subject to a vesting schedule, with [Percentage]% of the shares vesting on the date of this Agreement and the remaining [Percentage]% vesting over a period of [Number] years.

**8.2 Anti-Dilution Protection**: In the event of any issuance of new shares, the Founder Shareholders shall have the right to purchase additional shares to maintain their percentage ownership in the Company.

**8.3 Reserved Matters**: The following matters shall require the affirmative vote of the Founder Shareholders:

- Any amendment to the Company's Articles of Association
- Any issuance of new shares or other securities
- Any sale, merger, or other disposition of the Company's assets
- Any change in the Company's business or strategic direction

### 9. Dispute Resolution

**9.1 Negotiation**: In the event of any dispute arising out of or in connection with this Agreement, the parties shall first attempt to resolve the dispute through good faith negotiations.

**9.2 Mediation**: If the dispute cannot be resolved through negotiation, the parties shall submit the dispute to mediation in accordance with the rules of the Chartered Institute of Arbitrators, Kenya Branch.

**9.3 Arbitration**: If the dispute cannot be resolved through mediation, the dispute shall be finally resolved by arbitration in accordance with the rules of the Chartered Institute of Arbitrators, Kenya Branch. The seat of arbitration shall be Nairobi, Kenya, and the language of arbitration shall be English.

### 10. Termination

**10.1 Termination Events**: This Agreement shall terminate upon the occurrence of any of the following events:

- The written agreement of all the Shareholders
- The liquidation or dissolution of the Company
- The sale of all or substantially all of the Company's assets

**10.2 Effect of Termination**: Upon termination of this Agreement, the rights and obligations of the parties shall cease, except for any rights or obligations that have accrued prior to termination.

### 11. Miscellaneous Provisions

**11.1 Governing Law**: This Agreement shall be governed by and construed in accordance with the laws of Kenya.

**11.2 Entire Agreement**: This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether written or oral.

**11.3 Amendments**: This Agreement may be amended only by a written instrument signed by all the parties.

**11.4 Severability**: If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall remain in full force and effect.

**11.5 Counterparts**: This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

_________________________  
[Name of Shareholder 1]

_________________________  
[Name of Shareholder 2]

_________________________  
[Name of Shareholder 3]

_________________________  
VG Foods Limited

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This Shareholders Agreement is designed to protect the interests of the Founder Shareholders who have significantly contributed to the growth of VG Foods. It includes provisions for the issuance of preference shares, protection of founders' equity, and mechanisms for dispute resolution. This ensures that the founders' efforts and investments are safeguarded while allowing for the introduction of new shareholders under controlled conditions.

Sources:
- [Companies Act, 2015](http://kenyalaw.org/kl/fileadmin/pdfdownloads/Acts/CompaniesAct_No17of2015.pdf)
- [Chartered Institute of Arbitrators, Kenya Branch](https://www.ciarbkenya.org/)

draft a comprehensive shareholders agreement for a kenyan company known as VG Foods incorporated in kenya. initially they were four shareholders and one relinquished their shares to the company. Two of the shareholders have been doing the heavy lifting in the company building it to what it is right now. The third shareholder now wants to bring in someone to be the fourth shareholder but the two shareholders want to protect their sweat and time that they have put in . Kindly draft the shareholders agreement protecting the founders who put in time and a clause on preference shares