What is a Shareholders Agreement?
A Shareholders Agreement is a contract between the shareholders and the company. It protects the shareholders':
a) relationships between each other
b) other business arrangements
d) responsibilities, obligations and liabilities
A Shareholders' Agreement protects everyone?
Every company should have one. A Shareholders' Agreement provides:
1. how the company is run
2. responsibilities of the shareholders
2. clarity and certainty
3. reduced conflict between shareholders
4. protection of shareholder rights if conflict arises
Put a Shareholders Agreement in place early
Put a Shareholders Agreement in place when you first incorporate the company. Later on, circumstances may change. Resentment may build between shareholders.
It is, however, never too late to build a Shareholders Agreement.
Eight benefits of a Legal Consolidated Shareholders Agreement:
1. Tailored shareholder protection
2. Outlines the basis for important decision making and restricts the power of directors where necessary
3. Protects the owners, directors and the company against the actions of the others
4. Minimises business disputes between owners - makes it clear how decisions are made and provides dispute resolution
5. Assists in getting bank finance - shows stability to potential partners
6. Prevents changes in one shareholder’s personal circumstances affecting the company or other shareholders
7. Protects the rights of minority shareholders and the investment value of their shareholding
8. Sets out procedures if a shareholder decides to sell their shares
What is included in this Shareholders Agreement?
The Shareholders Agreement protects:
1. share splits and the types of share
2. voting rights of shareholders
3. actions that require the consent of shareholders
4. shareholders when they are also company employees
5. pre-emptive rights for the transfer of shares
6. how new shares are allocated
7. share valuation
8. shareholder liability when the company is in debt
9. share disposal
Need help building the document?
For legal advice telephone us. We are a law firm. We can help you answer the questions.
Adjunct Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
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