Shareholders Agreements

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A Shareholders Agreement (SA) is something that I strongly encourage all my clients who operate a business (either as a partnership or company) to have. When I first see a client about starting a new business, they are often full of enthusiasm and great intentions however, have not given much thought about what could go wrong.

The breakdown of a business relationship is a very stressful time for owners and by simply having a SA in place, you could save a lot of money on legal costs and stress and avoid Court.

What does the Shareholders Agreement cover?

The primary aim of the Shareholders Agreement is to resolve any potential issues that will arise in the operation of the business.

It will also typically include:

  1. What happens on the death or total permanent disablement of an owner;
  2. Conflict of interest;
  3. Retirement;
  4. Contribution of capital;
  5. Composition of the board;
  6. Decision making process and resolutions that require a majority or unanimous consent;
  7. The roles of the directors;
  8. The contribution of capital into the business as and when needed;
  9. Ownership of intellectual property;
  10. Profit distribution policies;
  11. Restraints of trade; and
  12. Dispute resolution.

The Shareholders Agreement, as opposed to your company’s constitution, is more specialised and tailored to your company’s particular purpose, the nature of its business and the aims and wishes of its shareholder’s.

Advantages of a Shareholders Agreement

The main aim of the SA is to bring certainty to the business relationship.

In particular, a SA will:

  1. Make the partners think about and address the issues at the right time (earlier rather than later);
  2. Create confidence between the partners as to the strategic direction of the business; and
  3. Help avoid expensive disagreements.

Preparing the Shareholders Agreement

Prior to preparing the SA, you should speak with all shareholder’s and get an understanding of what you want to achieve. Then, seek the advice of an experienced solicitor who will be able to explain to you the legal implications and then draft the SA for you.

As you can see, there are many issues to consider and an experienced solicitor can help ensure the Shareholders Agreement is tailored to suit you. It is easy to see why a Shareholders Agreement is an important tool in business planning.

If you have any questions relating to Shareholders Agreements, please do not hesitate to contact our team today.

The information provided in this article is for general information and educative purposes in summary form on legal topics which is current at the time it is published. The content does not constitute legal advice or recommendations and should not be relied upon as such. Whilst every care has been taken in the preparation of this article, FC Lawyers cannot accept responsibility for any errors, including those caused by negligence, in the material. We make no representations, statements or warranties about the accuracy or completeness of the information and you should not rely on it. You are advised to make your own independent inquiries regarding the accuracy of any information provided on this website. FC Lawyers does not guarantee, and accepts no legal responsibility whatsoever arising from or in connection to the accuracy, reliability, currency, correctness or completeness of any material contained in this article. Links to third party websites or articles does not constitute any endorsement or approval of those sites or the owners of those sites. Nothing in this article should be construed as granting any licence or right for you to use that content. You should consult the third party’s terms and conditions of use in relation to any third-party content. FC Lawyers disclaims all responsibility and all liability (including liability for negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way. Appropriate legal advice should always be obtained in actual situations.


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