Shareholder Agreements
Shareholder Agreements
Most small to medium sized businesses start by the setting up of a company. Shareholdings are apportioned and directors are appointed, but in many cases the administrative tasks end there as those involved are keen to simply get on with the running of the company. However, what is often forgotten, or not specifically agreed, is what to do in the event of a disagreement, transfer of shares and deadlock. This can cause serious difficulties with the running of the company in the event of a later dispute between the owners.
A carefully drafted shareholder agreement will formally record what has been agreed at the outset. The agreement can then be used as a reference point and will often prevent a costly shareholder dispute.
Shareholders agreements are private arrangements between the shareholders in a company. Minority shareholders, majority shareholders and those who hold shares equally want to ensure their rights are protected; agreements are therefore designed to protect the respective shareholders’ investment by setting out the procedures by which their shareholding is to be managed and controlled. They can be essential in avoiding later disputes and it is advisable to seek the help of a business lawyer in drafting an agreement that adequately meets the needs of all shareholders.
Commons terms of a shareholders’ agreement include:
- Who is to work in the company and on what basis?
- A list of matters which cannot change unless all the shareholders agree.
- An agreement to insure shareholders’ lives so that if they die the others have a fund to buy their shares.
- How dividends are paid
- 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
- How shareholders will vote on resolutions
- Prevention of shareholders from competing with the business of the company
Find a Corporate and Business Solicitor locally or nationally from a range of fixed legal cost options and select a quality Solicitor to save you money – wigster.com “Compare Solicitors, Compare Prices”
