A shareholders agreement does what it says!

20 March 2020

A shareholders agreement does what it says: it’s an agreement between all the shareholders of the company. But is a shareholder agreement necessary for your business? ….

For a number of reasons, it is good practice to have a shareholder agreement in place, to protect the business both now and in the future.

When disagreements happen

Scenarios and circumstances change. Just because you and your business partner (who may be a family member or spouse!) are the best of friends now, it doesn’t mean things couldn’t change – unfortunately. Therefore, it is best to have an agreement in place now and feel secure that whatever happens it can be dealt with. Don’t risk leaving it to chance!

Gives a voice to all shareholders

Enables shareholders to have a voice even if they aren’t a Director of the company.

Regulation of decision-making

There may be circumstances, for example, issuing of shares, that would require a unanimous consent of all shareholders. Some decisions however may only require majority shareholders, so the agreement could include provisions to ensure minority shareholders are also protected.

Controls transferring of shares

Stricter controls and regulations – who can buy or sell to whom and at what price – needs to be agreed.

Also you have to think about what happens in the event of the death of an individual.

Creates stability

Ensures greater business stability and allocation of roles amongst directors, as agreements can include roles within the business, e.g. who carries out sales, finance functions etc.

Rules to run by

Allows regulations of actually running the business, including setting of board meetings, payment of Directors, financing and banking arrangements etc.

So how do you start to draft your shareholders agreement? Our company secretarial team together with our legal team, are happy to help you get the agreement that is relevant to you, your shareholders and your company.

We are happy to have a meeting to understand your needs, provide a questionnaire to help you guide your discussion and implement your shareholder agreement.

Need more information?

Get in touch with Katherine Herrera on 01604 273782