South Dakota Shareholders' Agreement with Special Allocation of Dividends among Shareholders in a Close Corporation

• Category: Corporations - Shareholders and Stock
• State: Multi-State
• Control #: US-1085BG
• Format: Word; Rich Text

Description

A corporation whose shares are held by a single shareholder or a closely-knit group of shareholders (such as a family) is known as a close corporation. The shares of stock are not traded publicly. A shareholders' agreement may contain provisions relating to any phase of the affairs of a close corporation. Statutes often provide that the agreement may, as between the parties to the agreement, alter or waive the provisions of the general corporation law except those provisions that are specifically exempt from such alteration or waiver. A shareholders' agreement may not be altered or terminated except as provided by the agreement, or by all the parties, or by operation of law.

A South Dakota Shareholders' Agreement with Special Allocation of Dividends among Shareholders in a Close Corporation is a legally binding document that outlines the specific terms and conditions relating to the allocation of dividends among shareholders within a close corporation in the state of South Dakota. This agreement is crucial for ensuring fair and equitable distribution of profits among shareholders, while addressing the unique needs and objectives of the close corporation structure. Close corporations, also known as closely held corporations, are entities that have a limited number of shareholders and often operate with a smaller group of individuals who are actively involved in the business. These corporations differ from publicly traded companies, as they are not listed on stock exchanges, and their shares are usually not freely transferable. The Shareholders' Agreement with Special Allocation of Dividends in a Close Corporation allows the shareholders to customize the distribution of dividends according to their individual ownership percentages, investment contributions, or other predetermined criteria. This agreement provides a framework for determining each shareholder's entitlement to dividends and can help avoid potential disputes or conflicts that may arise in the absence of clear guidelines. Some key provisions that can be covered in a South Dakota Shareholders' Agreement with Special Allocation of Dividends among Shareholders in a Close Corporation include: 1. Dividend Allocation: This section of the agreement specifies the method or formula for allocating dividends among the shareholders. It can be based on the percentage of ownership, the amount of initial investment made by each shareholder, or any other agreed-upon criteria. 2. Prioritization of Dividends: The agreement may address the order in which dividend distributions are made. For example, it could state that preferred shareholders receive dividends before common shareholders or establish a tiered approach based on different classes of shares. 3. Tax Considerations: The agreement can include provisions to ensure compliance with applicable tax laws and regulations, considering the tax implications of dividend distributions for each shareholder. This may involve the recognition and accounting for different tax rates or liabilities. 4. Reinvestment of Dividends: The agreement may outline whether shareholders have the option to reinvest their dividends back into the corporation, either through purchasing additional shares or other approved investments. 5. Dispute Resolution: To address potential conflicts or disagreements regarding dividend allocations, the agreement can include a mechanism for resolving disputes, such as mediation or arbitration, before resorting to litigation. It is important to note that there may be different types of South Dakota Shareholders' Agreements with Special Allocation of Dividends among Shareholders in a Close Corporation, as these agreements can be tailored to meet the specific needs of each corporation. For instance, a close corporation involving multiple classes of shares (e.g., common shares and preferred shares) may have a different agreement than a close corporation with only one class of shares. In conclusion, a South Dakota Shareholders' Agreement with Special Allocation of Dividends among Shareholders in a Close Corporation establishes a framework for fair and transparent allocation of dividends, ensuring that each shareholder's rights and interests are protected while promoting the smooth operation of the close corporation.