What is Voting Agreement Drafting?
A voting agreement is a legal contract between shareholders of a corporation. It outlines how they are allowed to cast votes on business decisions, with the purpose of avoiding deadlock situations and minimizing the risk of disputes.
If you need to draft a voting agreement, you should read the rest of this article.
We’ll explore what key terms you should include in a voting agreement, how to draft it, and why you should hire a qualified lawyer to assist you through the voting agreement drafting process.
What are Key Terms in a Voting Agreement?
A voting agreement usually contains essential terms, such as the following:
- Parties. The shareholders bound by the agreement must be clearly stated.
- Board composition. This section of the agreement explains the number of board seats. It states what shareholders, such as founders, can appoint directors.
- Voting thresholds. This explains the percentage of votes needed to approve company regulations.
- Dispute resolution. There should be clarity about how conflict will be settled should it arise, such as if parties will go to mediation or arbitration.
- Protective provisions. These clauses specify that certain shareholder votes are required for big decisions or actions, such as selling the company.
- Voting proxies. This allows one party to cast votes for another shareholder if required, and under certain conditions.
- Amendments. If parties wish to change the agreement terms, this clause should explain how they can do this, such as if written consent is required.
- Term and termination. The agreement must specify how long it will last and what events will force termination.
What are Tips for Drafting a Voting Agreement?
When drafting a voting agreement, you should consider the following tips for clarity and fairness between parties.
Specify Voting Obligations
You should include what decisions the agreement will include, such as approving company mergers or appointing board members. Be specific by clearly explaining how parties can vote on matters and if any exceptions apply.
Include Breach Remedies
If a shareholder doesn’t comply with voting obligations assigned to them, the agreement must specify consequences to deter breaches. Legal remedies could include damages and injunctive relief.
Define the Purpose
You want clarity about why the voting agreement exists, such as maintaining stable control and protecting minority investors. This will help parties to include clauses that support the company’s goals.
Explain How Decisions are Made
The agreement must include clear and specific decision-making processes, such as how parties must communicate prior to shareholder meetings and what deadlines will exist for making decisions. Such details are important to prevent ambiguity.
Refer to Other Governing Documents
To maintain consistency, you should refer to other company documents, such as bylaws, certificates of incorporation, and shareholder agreements. This will prevent conflicting information that can lead to misinterpretations.
Define Included Shares
To prevent uncertainty, you want to mention all shares that are covered by the agreement. State if future-acquired shares are also included or not. This serves to maintain voting consistency.
Use Defined Terms
You can minimize your risk of ambiguity by writing clear, consistent definitions and cross-references throughout the document.
Plan for Future Events
When drafting a voting agreement, you should take some time to think about how its terms will apply after events such as funding or mergers. This ensures that the agreement can continue to operate as the company grows and changes, while also accommodating the parties’ intentions.
Consider Your Jurisdiction
It’s important to align your document with relevant rules in your jurisdiction. This will keep your agreement compliant and minimize your risk of legal disputes.
How Does a Lawyer Help You with Voting Agreement Drafting?
Since voting agreements require specific details and clarity, you should consider hiring a lawyer to draft yours for you. Here’s what a lawyer can do during the voting agreement drafting process:
- Explain all the legal rights and duties shareholders have.
- Align the voting agreement with relevant laws.
- Draft clear, specific clauses that minimize your risk of future legal disputes.
- Customize the voting provisions so that all parties’ goals are reflected.
- Advise you on various aspects of the voting agreement, such as decision-making procedures.
- Align the voting agreement with the company’s other documents, such as shareholders’ agreements.
- Negotiate terms with the other parties so that you can achieve a mutually-favorable agreement.
- Review the voting agreement if you’ve already drafted it. This will secure legal enforceability.
Where to Find a Lawyer for Voting Agreement Drafting
While you can draft a voting agreement, it’s in your best interest to hire a qualified lawyer for assistance with the process. Online legal platforms such as ContractsCounsel make finding a qualified lawyer an easy process.
ContractsCounsel is one of the largest online legal marketplaces that helps you to connect with a network of vetted lawyers. Requesting that one of the platform’s experienced lawyers helps you with the contract-drafting process is easy and you don’t even have to leave your home.
Here are the steps to follow online:
- Visit the ContractsCounsel marketplace.
- Post your project for free. Try to include a few details to help you find the most suitable lawyer, such as why you need a voting agreement.
- Receive multiple bids from lawyers directly on the platform. They will respond to your post without you having to conduct a lawyer search.
- Review the lawyers’ profiles. Before selecting a lawyer to work with, review the platform’s lawyer information, such as their location, client ratings for previous projects, expertise, and credentials.
- Connect with a lawyer you think is best suited to your requirements and hire them to draft a voting agreement for a flat fee.
