Articles

Should I Have a Shareholders Agreement?

When you go into business with other people, have you contemplated what might happen in hard times as well as the good times? Any time more than one person is involved in running a company, the possibility for a dispute arises. Having a framework to work within protects the value of the company and can avoid misunderstandings. An effective method of achieving this framework is through a shareholders agreement.

What is a shareholders agreement?

A shareholders agreement is a legally binding and confidential contract between the shareholders of a company. It creates additional rules and obligations beyond those of a company's constitution and the Companies Act 1993. The agreement can be tailored to your business and be as simple or and in-depth as you need.

Who needs a shareholders agreement?

Shareholders agreements are most appropriate for companies owned by a small number of owners, whether those owners are friends, family or independent investors.

Benefits

• Controlling who shareholders are, by including pre-emptive provisions – that may give all existing shareholders the first right to purchase the shares of an exiting shareholder.
• Recording an agreed set of business decisions – such as the issue of new shares, the buying or selling of a major asset or a material change in company's business.
• Providing for a dispute resolution process and a mechanism to deal with deadlock situations.

Although best prepared at the outset of the business relationship, a shareholders agreement to protect your business can be prepared at any time.

Contact us if you would like to discuss whether a shareholders agreement is right for your business.