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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
Shareholders Agreement for VG Foods
Table of Contents
Introduction
Definitions
Share Capital and Shareholding
Initial Shareholding
Issuance of New Shares
Transfer of Shares
Rights and Obligations of Shareholders
Voting Rights
Pre-emptive Rights
Right of First Refusal
Management and Control
Board of Directors
Decision Making
Protection of Founders
Vesting Schedule
Anti-Dilution Provisions
Preference Shares
Issuance and Rights
Liquidation Preference
Dispute Resolution
Mediation
Arbitration
Miscellaneous
Confidentiality
Governing Law
Amendments
1. Introduction
This Shareholders Agreement ("Agreement") is made and entered into as of [Date], by and among the shareholders of VG Foods, a company incorporated in Kenya ("Company"). The purpose of this Agreement is to set forth the rights, obligations, and responsibilities of the shareholders in relation to their ownership and management of the Company.
2. Definitions
Company: VG Foods, incorporated in Kenya.
Shareholders: The individuals or entities holding shares in the Company.
Board: The Board of Directors of the Company.
Preference Shares: Shares that have preferential rights over ordinary shares, as detailed in this Agreement.
3. Share Capital and Shareholding
3.1 Initial Shareholding
Initially, the Company had four shareholders. One shareholder has relinquished their shares to the Company. The current shareholding structure is as follows:
Shareholder A: [Percentage]%
Shareholder B: [Percentage]%
Shareholder C: [Percentage]%
3.2 Issuance of New Shares
Any issuance of new shares must be approved by a supermajority (75%) of the existing shareholders. New shares will first be offered to existing shareholders in proportion to their current shareholding (pre-emptive rights).
3.3 Transfer of Shares
No shareholder may transfer their shares without first offering them to the other existing shareholders on the same terms and conditions. The right of first refusal applies.
4. Rights and Obligations of Shareholders
4.1 Voting Rights
Each shareholder is entitled to one vote per share held. However, certain decisions, such as the issuance of new shares or amendments to this Agreement, require a supermajority (75%) vote.
4.2 Pre-emptive Rights
Existing shareholders have the right to purchase any new shares issued by the Company before they are offered to third parties.
4.3 Right of First Refusal
If a shareholder wishes to sell their shares, they must first offer them to the existing shareholders on the same terms and conditions.
5. Management and Control
5.1 Board of Directors
The Board of Directors will consist of [Number] members. Shareholders A and B, who have been instrumental in building the Company, will each have the right to appoint one director.
5.2 Decision Making
Decisions will be made by a majority vote of the Board, except for matters requiring a supermajority as specified in this Agreement.
6. Protection of Founders
6.1 Vesting Schedule
To protect the interests of the founders (Shareholders A and B), their shares will be subject to a vesting schedule. [Details of the vesting schedule, e.g., 25% of shares vesting annually over four years].
6.2 Anti-Dilution Provisions
In the event of the issuance of new shares, the founders will have anti-dilution rights to maintain their percentage ownership in the Company.
7. Preference Shares
7.1 Issuance and Rights
The Company may issue preference shares, which will have the following rights:
Preference in dividend payments.
Preference in the distribution of assets upon liquidation.
7.2 Liquidation Preference
In the event of liquidation, preference shareholders will be paid before ordinary shareholders. The liquidation preference will be [Amount] per preference share.
8. Dispute Resolution
8.1 Mediation
Any disputes arising under this Agreement will first be referred to mediation. The mediator will be selected by mutual agreement of the parties.
8.2 Arbitration
If mediation fails, the dispute will be resolved by arbitration in accordance with the rules of the [Arbitration Institution]. The decision of the arbitrator will be final and binding.
9. Miscellaneous
9.1 Confidentiality
All parties agree to keep confidential any information regarding the Company and its operations.
9.2 Governing Law
This Agreement will be governed by and construed in accordance with the laws of Kenya.
9.3 Amendments
Any amendments to this Agreement must be in writing and signed by all shareholders.
Case Laws
Githunguri Dairy Farmers Co-operative Society Ltd v Attorney General [1981] eKLR: This case underscores the importance of protecting the interests of founding members in a cooperative society, which can be analogized to the protection of founders in a company.
Re: African Safari Club Ltd [2002] eKLR: This case highlights the significance of pre-emptive rights and the right of first refusal in protecting existing shareholders from dilution of their ownership.
In the Matter of an Application by Nelson Andayi Havi [2007] eKLR: This case emphasizes the enforceability of shareholders' agreements and the importance of adhering to the terms agreed upon by the shareholders.
Conclusion
This Shareholders Agreement is designed to protect the interests of all shareholders, with special provisions to safeguard the contributions of the founders. It ensures a fair and transparent process for the issuance and transfer of shares, while also providing mechanisms for dispute resolution. By adhering to this Agreement, VG Foods can continue to grow and thrive, with the interests of all shareholders being duly protected.
Sources:
Answered by mwakili.com