The Role of a Shareholders' Agreement.

If your company has more than one shareholder, you should usually have a shareholders’ agreement in place.

The role of a shareholders’ agreement is to establish the obligations of each shareholder, and protect their respective rights. Having a shareholders’ agreement in place reduces the risk of misunderstanding between shareholders, and ensures that the shareholders deal with important matters, like an exit strategy and company funding, at the outset of the relationship.

The contents of a shareholders’ agreement

A shareholders’ agreement reduces the risks to your company when you have more than one shareholder. Shareholders’ agreements typically outline:

• How directors are appointed and removed.
• What actions must be completed with the authorisation of a high percentage of shareholders (such as changing the nature of the business, approving major transactions, borrowing or lending money, or significant capital expenditure).
• How the company should be funded.
• The requirements in relation to the company to hold insurances over the lives of the directors.
• How the shares are to be valued, the procedure around the transfer of shares, and how shares will be valued when sold.
• The process if a shareholder doesn’t perform their obligations to the company, and how these disputes will be resolved.

Our team of professional Commercial lawyers will draft your constitution and shareholders’ agreement, and can also provide advice in relation to issues that may arise between shareholders.