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Shareholder Agreement for a Family-Owned Business

This Shareholder Agreement (the "Agreement") is made and entered into as of [Date], by and between [Shareholder 1 Full Name], residing at [Shareholder 1 Address] ("Shareholder 1"), [Shareholder 2 Full Name], residing at [Shareholder 2 Address] ("Shareholder 2"), and [Company Name], a company incorporated under the laws of Kenya, with its registered office at [Company Address] ("Company").

Introduction
Definitions
Purpose of the Agreement
Share Ownership and Voting Rights
Management and Operations
Dividends and Distributions
Transfer of Shares
Deadlock Resolution
Confidentiality
Dispute Resolution
Governing Law and Jurisdiction
Entire Agreement
Severability
Notices
Amendments
Waiver
Binding Effect
Counterparts
Signatures

1. Introduction

This Agreement sets forth the terms and conditions governing the relationship between the Shareholders and the Company, including the ownership, management, and operation of the Company. The Shareholders recognize that the Company is a family-owned business and that the success of the Company is dependent upon the cooperation and mutual trust of the Shareholders.

2. Definitions

For the purposes of this Agreement, the following terms shall have the meanings set forth below:

"Agreement" means this Shareholder Agreement, as amended from time to time.
"Board" means the Board of Directors of the Company.
"Company" means [Company Name], a company incorporated under the laws of Kenya.
"Shareholder" means each of Shareholder 1 and Shareholder 2.
"Shares" means the shares of the Company owned by the Shareholders.
"Voting Rights" means the right to vote on matters submitted to the Shareholders for a vote.

3. Purpose of the Agreement

The purpose of this Agreement is to:

Define the ownership and voting rights of the Shareholders.
Establish the framework for the management and operation of the Company.
Provide a mechanism for the transfer of Shares.
Resolve any deadlocks that may arise between the Shareholders.
Protect the confidentiality of the Company's information.
Establish a process for resolving disputes between the Shareholders.

4. Share Ownership and Voting Rights

Initial Share Ownership: Shareholder 1 shall own [Shareholder 1 Percentage]% of the issued and outstanding Shares of the Company, and Shareholder 2 shall own [Shareholder 2 Percentage]% of the issued and outstanding Shares of the Company.
Voting Rights: Each Shareholder shall have the right to vote on all matters submitted to the Shareholders for a vote, in proportion to their respective share ownership.
Restrictions on Voting: The Shareholders agree that they will not vote their Shares in a manner that is detrimental to the interests of the Company.

5. Management and Operations

Board of Directors: The Board shall consist of [Number] directors, with [Number] directors being appointed by Shareholder 1 and [Number] directors being appointed by Shareholder 2.
Management: The day-to-day management of the Company shall be vested in the Board.
Decisions: All major decisions affecting the Company, including but not limited to, the following, shall be made by the Board:
- Approving the Company's annual budget.
- Hiring and firing key employees.
- Entering into significant contracts.
- Declaring dividends.
Meetings: The Board shall meet at least [Number] times per year.
Quorum: A quorum for a Board meeting shall be [Number] directors.
Voting: All decisions of the Board shall be made by a majority vote of the directors present at a meeting.

6. Dividends and Distributions

Dividend Policy: The Company shall distribute dividends to the Shareholders in accordance with the following policy:
- The Company shall first pay all outstanding debts and obligations.
- The Company shall then retain a reasonable amount of earnings for working capital and future growth.
- The remaining earnings shall be distributed to the Shareholders in proportion to their respective share ownership.
Distributions: The Company may make distributions to the Shareholders in the form of cash, stock, or other assets.

7. Transfer of Shares

Restrictions on Transfer: The Shareholders agree that they will not transfer their Shares to any third party without the prior written consent of the other Shareholder.
Right of First Refusal: If a Shareholder desires to transfer their Shares, they shall first offer the Shares to the other Shareholder at a price equal to the fair market value of the Shares, as determined by an independent appraiser mutually agreed upon by the Shareholders.
Death or Incapacity: In the event of the death or incapacity of a Shareholder, their Shares shall be transferred to their heirs or beneficiaries, subject to the restrictions on transfer set forth in this Agreement.

8. Deadlock Resolution

Deadlock: In the event of a deadlock on any matter before the Board, the Shareholders shall attempt to resolve the deadlock by mutual agreement.
Arbitration: If the Shareholders are unable to resolve the deadlock by mutual agreement, the deadlock shall be submitted to binding arbitration in accordance with the Arbitration Act, 1995.
Arbitrator: The arbitrator shall be a reputable and experienced businessperson or lawyer, mutually agreed upon by the Shareholders.
Decision: The decision of the arbitrator shall be final and binding on the Shareholders and the Company.

9. Confidentiality

Confidential Information: The Shareholders agree to hold confidential all information relating to the Company, including but not limited to, financial information, trade secrets, customer lists, and marketing plans.
Disclosure: The Shareholders shall not disclose any Confidential Information to any third party without the prior written consent of the other Shareholder.
Exceptions: The Shareholders may disclose Confidential Information to the extent required by law or by a court order.

10. Dispute Resolution

Negotiation: The Shareholders agree to attempt to resolve any disputes arising out of or relating to this Agreement through good faith negotiation.
Mediation: If the Shareholders are unable to resolve the dispute through negotiation, the dispute shall be submitted to mediation in accordance with the Mediation Act, 2012.
Mediator: The mediator shall be a reputable and experienced mediator, mutually agreed upon by the Shareholders.
Arbitration: If the Shareholders are unable to resolve the dispute through mediation, the dispute shall be submitted to binding arbitration in accordance with the Arbitration Act, 1995.
Arbitrator: The arbitrator shall be a reputable and experienced businessperson or lawyer, mutually agreed upon by the Shareholders.
Decision: The decision of the arbitrator shall be final and binding on the Shareholders and the Company.

11. Governing Law and Jurisdiction

This Agreement shall be governed by and construed in accordance with the laws of Kenya. Any dispute arising out of or relating to this Agreement shall be subject to the exclusive jurisdiction of the courts of Kenya.

12. Entire Agreement

This Agreement constitutes the entire agreement between the Shareholders and the Company with respect to the subject matter hereof and supersedes all prior or contemporaneous communications, representations, or agreements, whether oral or written.

13. Severability

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

14. Notices

All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered personally, sent by certified mail, return receipt requested, or sent by overnight courier service, addressed as follows:

If to Shareholder 1: [Shareholder 1 Address]

If to Shareholder 2: [Shareholder 2 Address]

If to the Company: [Company Address]

15. Amendments

This Agreement may be amended only by a written instrument signed by all of the Shareholders.

16. Waiver

No waiver of any provision of this Agreement shall be effective unless in writing and signed by the party against whom the waiver is sought to be enforced.

17. Binding Effect

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

18. Counterparts

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

19. Signatures

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

Shareholder 1:

[Shareholder 1 Signature]

[Shareholder 1 Printed Name]

Shareholder 2:

[Shareholder 2 Signature]

[Shareholder 2 Printed Name]

Company:

[Company Signature]

[Company Printed Name]

[Company Seal]

Sources:

TLDR:

This Shareholder Agreement outlines the terms and conditions governing the relationship between the Shareholders and the Company, including ownership, management, and operation. It covers aspects like share ownership, voting rights, management structure, dividend distribution, transfer of shares, deadlock resolution, confidentiality, dispute resolution, and governing law.

Conclusion

This Shareholder Agreement is a crucial document for any family-owned business in Kenya. It provides a framework for the relationship between the Shareholders and the Company, ensuring clarity, fairness, and a mechanism for resolving potential disputes. It is essential to consult with a legal professional to ensure that the Agreement is tailored to the specific needs of the business and the Shareholders.