Every corporation no matter how big or small, has shareholders. Whether the corporation is listed on the stock exchange and therefore a publicly traded corporation or is simply owned by a small group of private investors (closely held companies) without trading on an exchange, it still has shareholders. In fact, most businesses in the United States operate as “privately held” companies and they can be of any size – from small family-owned businesses to large multi-national corporations.
A shareholders’ agreement, also known as a stockholders’ agreement, is an agreement between and among the shareholders of an existing corporation that describes how the company operates and outlines the shareholders’ rights and obligations.
In other words, the shareholders’ agreement is a contract between the co-owners (also known as shareholders) of the same corporation that includes information about the privileges and protections of the corporation’s owners; it is intended to ensure that the owners are treated fairly and their rights are protected.