Put simply a shareholders’ agreement is essentially a contract between some or all of the shareholders in a company and frequently the company itself. Shareholders’ agreement states how the company is to be managed and how to address issues that might become conflicting in the future if not agreed in advance.
It is basically made to make sure that the shareholders are treated fairly and that their rights are protected. Such agreements place at the time of company formation or at the time of first issue. It is beneficial to both the minority and majority shareholders as it specifies the rules relating to the company. Certain important points flow from the basic fact that a shareholders’ agreement is a contract.