A shareholders’ agreement is an agreement between the owners of a company which governs the business relationship between the company and each of its shareholders.
One of the key benefits of a shareholders’ agreement is the certainty it provides around how shares are to be dealt with in a variety of situations; for example, if a shareholder wishes to leave, dies or becomes ill, ensuring costly disputes are avoided in a potentially difficult situation, as the shareholders have already agreed how to deal with these issues up-front.
Common matters covered by a shareholders’ agreement include:
- Restrictions on the nature of the business of the company
- The entitlement for the shareholders to either be directors of the company or to appoint and remove a nominated director.
- Matters which require the consent of all or a specified percentage of the shareholders, for example the recruitment of new staff, sales and acquisitions of assets beyond a certain value, borrowing money, opening new offices or premises.
- Apportionment of the liability between the shareholders for any personal guarantees they have been required to give
- Restrictions on the issue of new shares
- Restrictions on the transfer of existing shares
- Options for the shareholders to acquire each other’s shares in certain circumstances
- Provisions for what is to happen on the retirement, death or incapacity of a shareholder
- Provisions as to how shareholders will vote on resolutions
- Provisions to prevent shareholders from competing with the business of the company
- The policy for the payment of dividends
A company’s constitution (known as its articles of association) should also be considered when contemplating a shareholders’ agreement, to ensure that these documents work together with each other and do not contain conflicting provisions.
Our aim is always to create a workable solution both at the time the agreement is put in place, and for the future – we take time to understand your ambitions for the business, ensuring documentation created caters for your future plans.
Your Specialist for Shareholder relations is...
Richard James Partner
Corporate Finance, Franchising, Technology and Media Contracts and Intellectual Property