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Shares clause: Copy, customize, and use instantly

Introduction

A shares clause outlines the terms and conditions regarding the issuance, transfer, and rights associated with shares in a company. It defines the responsibilities and rights of shareholders, the procedures for issuing or transferring shares, and any restrictions or protections tied to the ownership of shares. This clause is critical for governing equity ownership and ensuring clarity around shareholder rights and obligations.

Below are templates for shares clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.

Standard shares clause

This version includes basic terms for issuing and transferring shares.

The [Company] shall issue [X] shares to the shareholders, each share representing an equal portion of ownership in the company. Shareholders shall have the right to transfer their shares in accordance with the terms outlined in this agreement, subject to any restrictions outlined herein.

Shares clause with right of first refusal

This version includes a right of first refusal for existing shareholders.

The shareholders shall have the right of first refusal if any shareholder wishes to transfer or sell their shares. The selling shareholder must offer their shares to the other shareholders on the same terms as any third-party offer, and the other shareholders will have [X] days to accept or reject the offer.

Shares clause with restrictions on transfer

This version includes restrictions on the transfer of shares.

No shareholder shall transfer, sell, or otherwise dispose of any shares without the prior written consent of the company and the approval of the board of directors. Any attempted transfer in violation of this clause shall be deemed null and void.

This version includes a share buyback option for the company.

The [Company] shall have the right to buy back shares from shareholders at a price determined by the board of directors, subject to the company’s financial position and market conditions. The company may exercise this right at any time, provided it offers the shareholder fair market value for the shares being bought back.

Shares clause with voting rights

This version includes voting rights for shareholders.

Each shareholder shall have the right to vote on matters submitted to a shareholder vote, with each share entitling the holder to one vote. Voting may be conducted at shareholder meetings, either in person or by proxy, in accordance with the company’s bylaws.

Shares clause with dividend entitlement

This version includes dividend entitlement for shareholders.

Shareholders shall be entitled to dividends in proportion to their shareholdings, as declared by the board of directors. Dividends will be paid on an annual basis, subject to the company’s profitability and board approval.

Shares clause with class-specific rights

This version includes class-specific rights for different types of shares.

The [Company] may issue different classes of shares, each with distinct rights and privileges. Class [A] shares shall entitle the holder to [specific rights], while Class [B] shares shall entitle the holder to [different rights]. The rights of each class of shares shall be as specified in the company’s articles of incorporation.

Shares clause with anti-dilution protection

This version includes anti-dilution protection for shareholders.

In the event of a new issuance of shares or other equity securities, the company shall offer existing shareholders the opportunity to purchase additional shares to maintain their percentage ownership, thereby preventing dilution of their equity stake. The terms of this anti-dilution protection shall be outlined in the company’s shareholder agreement.

Shares clause with tag-along rights

This version includes tag-along rights for minority shareholders.

In the event that one or more major shareholders intend to sell their shares to a third party, minority shareholders shall have the right to tag along and sell their shares on the same terms and conditions as the selling shareholder, ensuring that they are not left behind in the event of a sale.

Shares clause with drag-along rights

This version includes drag-along rights for major shareholders.

In the event that shareholders holding a majority of the company’s shares agree to sell their shares to a third party, those shareholders shall have the right to require minority shareholders to sell their shares on the same terms and conditions as part of the transaction, ensuring the completion of the sale.

Shares clause with shareholder buy-sell agreement

This version includes a shareholder buy-sell agreement.

In the event that a shareholder wishes to sell or transfer their shares, or in the case of the shareholder’s death or disability, the remaining shareholders shall have the option to purchase the shares under the terms of a buy-sell agreement. The price and payment terms for the shares shall be determined based on an independent valuation.

Shares clause with preemptive rights

This version includes preemptive rights for shareholders.

Existing shareholders shall have preemptive rights to purchase new shares issued by the company, allowing them to maintain their proportional ownership interest. Preemptive rights may be exercised within [X] days of receiving notice of the new issuance and shall be based on the number of shares held by each shareholder.

Shares clause with lock-up period

This version includes a lock-up period for new shares.

Shareholders who acquire shares in the company through a new issuance or capital raise shall be subject to a lock-up period of [X] months, during which they are prohibited from selling or transferring their shares. This lock-up period is intended to maintain market stability after the issuance of new shares.

This version includes the issuance of share certificates.

The company will issue share certificates to shareholders, representing their ownership interest in the company. These certificates will be signed by the company’s officers and include the shareholder’s name, the number of shares owned, and any applicable restrictions on transfer.

This version includes approval for changes to the share structure.

Any changes to the company’s share structure, including the issuance of new classes of shares or changes to the rights attached to existing shares, shall require the approval of [X]% of the shareholders or the board of directors, as specified in the company’s articles of incorporation.

Shares clause with right to receive financial statements

This version includes the right to receive financial statements.

Shareholders shall have the right to receive the company’s financial statements, including annual reports, balance sheets, and income statements. The company will provide these documents to shareholders within [X] days of the close of the fiscal year, ensuring transparency and access to important financial information.

This version includes restrictions on share ownership.

The company may impose restrictions on share ownership to ensure compliance with regulatory requirements or to maintain control over the ownership structure. These restrictions may include limiting the percentage of shares that can be held by any one shareholder or prohibiting the transfer of shares to certain entities or individuals.

Shares clause with employee stock ownership plan (ESOP)

This version includes an employee stock ownership plan (ESOP).

The [Company] may establish an Employee Stock Ownership Plan (ESOP) to provide employees with the opportunity to acquire shares in the company. The plan will be structured to align employees’ interests with the company’s long-term growth and performance, offering employees the ability to share in the company’s success.

Shares clause with voting by proxy

This version includes voting by proxy.

Shareholders may exercise their right to vote at shareholder meetings by appointing a proxy to vote on their behalf. Proxies must be submitted in writing and received by the company at least [X] days prior to the meeting. Each shareholder is entitled to appoint a proxy to vote on their behalf at any meeting of the shareholders.

Shares clause with terms for shareholder exit

This version includes terms for shareholder exit.

In the event that a shareholder wishes to exit the company, the remaining shareholders shall have the right of first refusal to purchase the exiting shareholder’s shares. The terms of the exit, including the price and payment schedule, shall be determined based on an independent valuation.

Shares clause with stock option plan for employees

This version includes a stock option plan for employees.

The [Company] will offer stock options to its employees as part of an employee compensation plan. These options will be vested over a period of [X] years, with the employees having the right to exercise their options at a price determined by the board of directors.

Shares clause with equal voting rights for all shareholders

This version includes equal voting rights for all shareholders.

Each share in the company shall carry equal voting rights, with each share representing one vote. No shareholder shall have more than one vote per share, ensuring that all shareholders have an equal say in company decisions.

This version includes share allocation based on contribution.

The allocation of shares to the company’s founders, employees, and investors will be based on their respective contributions to the business, including capital investment, intellectual property, and operational support. These allocations will be determined by the board of directors in consultation with the company’s stakeholders.

Shares clause with restriction on foreign ownership

This version includes restrictions on foreign ownership.

The company may impose restrictions on foreign ownership of shares to comply with regulatory requirements or to maintain local control of the business. No more than [X]% of the company’s shares may be owned by non-resident individuals or foreign entities without the approval of the board of directors.

This version includes a staggered share voting system.

The [Company] will implement a staggered share voting system, where certain shares carry different voting powers based on the duration of ownership. Long-term shareholders may receive additional voting rights to incentivize long-term investment and participation in company governance.

Shares clause with redemption rights for shareholders

This version includes redemption rights for shareholders.

The [Company] grants shareholders the right to redeem their shares at a specified price, as determined by the board of directors. The company may redeem shares on demand or at its discretion, in accordance with the terms outlined in the shareholder agreement.

This version includes share allocation in the event of an IPO.

In the event of an Initial Public Offering (IPO), the [Company] will allocate shares to its shareholders in proportion to their current holdings. Existing shareholders will have the opportunity to purchase additional shares in the IPO to maintain their ownership percentage.

Shares clause with limited transferability

This version includes limited transferability of shares.

The transfer of shares by a shareholder is restricted and may only occur under specific conditions. These conditions include obtaining approval from the company’s board of directors and offering the shares to existing shareholders before transferring them to a third party.

Shares clause with preferred shares for investors

This version includes preferred shares for investors.

The [Company] will issue preferred shares to investors, which will carry preferential rights in terms of dividends and liquidation preferences. Preferred shareholders will have the right to receive dividends before common shareholders and will receive a higher payout in the event of company liquidation.

Shares clause with restrictions on sale of shares to competitors

This version includes restrictions on the sale of shares to competitors.

Shareholders are prohibited from selling or transferring their shares to any entity or individual that competes directly with the [Company]. Any such transfer will be subject to the approval of the board of directors and may result in the immediate forfeiture of the shares.

Shares clause with automatic conversion of preferred shares

This version includes automatic conversion of preferred shares.

Preferred shares issued by the [Company] shall automatically convert into common shares upon a triggering event, such as the company achieving a specified valuation or conducting an IPO. The conversion rate will be determined according to the terms set forth in the company’s articles of incorporation.

Shares clause with buy-sell agreement

This version includes a buy-sell agreement.

In the event that a shareholder wishes to sell their shares or if a triggering event occurs (e.g., death, incapacity), the remaining shareholders will have the right to buy the shares at a price determined by an independent valuation. If no purchase is made, the shares may be sold to an external buyer subject to the terms of the agreement.

Shares clause with voting rights restriction for minority shareholders

This version includes voting rights restrictions for minority shareholders.

Minority shareholders, defined as those holding less than [X]% of the total shares, shall have limited voting rights in certain matters, such as the election of directors or approval of major corporate actions. These rights may be adjusted based on the shareholder agreement.

This version includes a share issuance approval process.

The issuance of new shares by the [Company] will require the approval of the board of directors and may also require shareholder approval, depending on the type of shares being issued and the overall impact on existing shareholders.

Shares clause with shareholder exit strategy

This version includes a shareholder exit strategy.

In the event of a shareholder exit, the company will offer to buy back shares at a fair market value. If the company is unable or unwilling to buy back the shares, the exiting shareholder may sell their shares to a third party, subject to board approval and any transfer restrictions.

This version includes a share repurchase program.

The [Company] will implement a share repurchase program to buy back outstanding shares in the open market or through private transactions. This program will help manage the company’s capital structure and return value to shareholders by reducing the total number of shares outstanding.

Shares clause with issuance of warrants

This version includes issuance of warrants.

The [Company] may issue warrants to shareholders, giving them the right to purchase additional shares at a predetermined price at a future date. These warrants may be exercised within [X] years of issuance, and any unexercised warrants will expire at the end of the period.

This version includes conditional share transfers.

Share transfers by any shareholder are conditional upon the approval of the board of directors, who may refuse to approve a transfer if it conflicts with the company’s strategic goals or financial interests. This condition is outlined to ensure that shareholders align with the long-term vision of the company.

Shares clause with performance-based equity grants

This version includes performance-based equity grants.

The [Company] will issue equity grants to executives, employees, and key stakeholders based on the achievement of performance milestones. These grants will be subject to vesting conditions tied to the company’s financial performance or other key business metrics.

Shares clause with stockholder agreement

This version includes a stockholder agreement.

All shareholders of the [Company] will be bound by a stockholder agreement that governs their rights, duties, and responsibilities, including restrictions on share transfers, voting rights, and dispute resolution procedures. The agreement will be reviewed and updated periodically to reflect any changes in the shareholder structure or corporate governance.

Shares clause with transfer on death provision

This version includes a transfer on death provision.

In the event of a shareholder’s death, their shares shall be automatically transferred to their designated beneficiary or estate, subject to the terms of the shareholder agreement. The company will assist in the smooth transfer of ownership, ensuring that the new shareholder is recognized under the company’s records.

Shares clause with equity compensation for directors

This version includes equity compensation for directors.

The [Company] will provide equity compensation to its directors in the form of stock options or restricted shares. This compensation will align the directors’ interests with those of the shareholders and serve as an incentive for their ongoing contribution to the company’s success.

Shares clause with minimum shareholding requirement

This version includes a minimum shareholding requirement.

The [Company] will set a minimum shareholding requirement for key employees or executives, requiring them to hold at least [X]% of the company’s shares for a specified period to align their interests with the company’s long-term performance.

Shares clause with shareholder approval for major transactions

This version includes shareholder approval for major transactions.

Any major transactions, including mergers, acquisitions, or sales of assets, will require approval by shareholders holding at least [X]% of the company’s shares. Shareholders will be provided with detailed information and the opportunity to vote on these transactions.

Shares clause with issuance of bonus shares

This version includes issuance of bonus shares.

The [Company] may issue bonus shares to existing shareholders in proportion to their current holdings. These shares will be issued without additional cost to the shareholders and will not alter the overall value of their holdings.

Shares clause with shareholder liability cap

This version includes a shareholder liability cap.

Shareholders shall not be liable for more than the unpaid portion of their shares. In the event of company liquidation or financial distress, shareholders’ liabilities will be limited to their unpaid shareholding value and will not exceed the amount of capital they have committed to the company.

Shares clause with redemption of preferred shares

This version includes redemption of preferred shares.

The [Company] reserves the right to redeem preferred shares at a predetermined price, either at the company’s discretion or upon the occurrence of certain events, such as a change in control or the company’s financial restructuring.

Shares clause with no-shareholding transfer clause

This version includes a no-shareholding transfer clause.

No shareholder shall transfer or assign any of their shares in the company without first obtaining written consent from the board of directors. Any unauthorized transfer of shares will be deemed void and subject to reversal by the company.

Shares clause with weighted voting rights

This version includes weighted voting rights for specific shareholders.

The [Company] may issue shares with weighted voting rights, giving certain classes of shares more voting power than others. For example, Class [A] shares may carry [X] votes per share, while Class [B] shares carry one vote per share.

Shares clause with right to repurchase shares upon termination

This version includes the right to repurchase shares upon termination.

The [Company] reserves the right to repurchase the shares of any employee, director, or key shareholder who leaves the company. The repurchase price will be determined based on a mutually agreed valuation or an independent third-party appraisal.

This version includes share issuance upon achievement of milestones.

The [Company] may issue additional shares to employees, contractors, or partners upon the achievement of specific business milestones or performance targets. These shares will be issued as part of a performance-based equity compensation plan.

Shares clause with voluntary buyback option

This version includes a voluntary buyback option for shareholders.

Shareholders will have the option to sell their shares back to the company at market value, upon request, at any time during the term of their investment. The company may, at its discretion, choose to repurchase the shares, subject to available liquidity and board approval.

This version includes shareholder approval for new share issuance.

The [Company] will require shareholder approval before issuing new shares or diluting existing shareholding. Shareholders will be given the opportunity to vote on any new issuance at a special meeting or through a written consent process.

This version includes rights for share buyback during liquidity events.

In the event of a liquidity event, such as an acquisition or IPO, the [Company] shall have the right to buy back shares from shareholders at a premium price to ensure liquidity and stability for remaining shareholders.

Shares clause with restriction on pledge of shares

This version includes restrictions on pledging shares.

Shareholders may not pledge, mortgage, or otherwise encumber their shares without prior written consent from the board of directors. Any attempt to pledge shares without consent will result in the shares being subject to repurchase by the company.

Shares clause with equity stake threshold for investor rights

This version includes an equity stake threshold for investor rights.

Investors holding at least [X]% of the company’s outstanding shares will have special rights, including the ability to nominate a member to the board of directors, veto key decisions, and access confidential financial reports.

Shares clause with minimum holding period for shareholders

This version includes a minimum holding period for shareholders.

All shareholders must hold their shares for a minimum period of [X] years from the date of acquisition before selling or transferring their shares. This provision is intended to promote long-term ownership and stability in the company’s shareholder base.

This version includes share classes for employee stock options.

The [Company] will issue a separate class of shares for the employee stock option plan (ESOP). These shares will carry standard voting rights and dividends but may be subject to specific restrictions, including a longer vesting period and restricted transferability.

Shares clause with restrictions on voting by non-shareholder groups

This version includes restrictions on voting by non-shareholder groups.

Only individuals or entities holding valid shares in the company will have the right to vote at shareholder meetings. Non-shareholder groups, including any affiliates, may not cast votes or influence decisions on company matters.

This version includes notice of share issuance to shareholders.

The company will provide all shareholders with written notice at least [X] days before issuing new shares, detailing the number of shares to be issued, the intended purpose, and the potential effect on the value of existing shares.

Shares clause with requirement for equal participation in future offerings

This version includes a requirement for equal participation in future offerings.

Shareholders shall have the right to participate in future offerings of shares on a pro-rata basis, enabling them to maintain their percentage ownership in the company. The company will provide equal access to new shares based on existing shareholding percentages.

Shares clause with issuance of restricted shares for key employees

This version includes the issuance of restricted shares for key employees.

The [Company] will issue restricted shares to key employees as part of their compensation package. These shares will be subject to a vesting period and can only be transferred upon meeting certain performance targets or after a specified period.

Shares clause with restrictions on transferring shares to competitors

This version includes restrictions on transferring shares to competitors.

Shareholders are prohibited from transferring or selling shares to competitors of the company, as defined by the board of directors. Any such transfer will require prior approval by the board, which may reject the transfer if it is deemed detrimental to the company’s interests.

This version includes consideration of ESG factors for share issuance.

The [Company] will consider environmental, social, and governance (ESG) factors in its decision to issue shares. Shareholders who align with the company’s sustainability goals and responsible corporate practices may be prioritized in future share offerings.

Shares clause with shareholder participation in dividend distribution decisions

This version includes shareholder participation in dividend distribution decisions.

Shareholders will have the opportunity to vote on the distribution of dividends at the annual general meeting. The company’s board will propose the dividend amount, which will be subject to shareholder approval and aligned with the company’s financial performance.

This version includes conditional share issuance based on performance.

The [Company] will issue additional shares to certain employees, contractors, or stakeholders only upon the achievement of specified performance milestones. The issuance will be subject to the company meeting its revenue, profitability, or other key performance indicators (KPIs).

This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

Last updated 21 Apr 2025