A Shareholders’ Agreement – Why You Need One

Best Blog February 12, 2023

When you own a Company with other people, it is only sensible, and can often be crucial that you ensure that the situation is protected by a Shareholders Agreement.

A Shareholders Agreement – What is it?

A Shareholders’ Agreement is a written agreement drawn up by the Shareholders of a Company. It differs from the Company’s Articles of Association and does not have to be registered at Companies House, thus ensuring that it remains private.

Understanding what a Shareholders’ Agreement can do:

A Shareholders’ Agreement gives you an increased amount of control over your business in a variety of ways. These include:

– Deciding how a new shareholder can join the handelsregisterauszug online company.
– Laying out a regulated process for shareholders so that their rights are safeguarded and their duties within the Company clearly distinguished.
– Specifying how people can buy and sell shares, who can buy and sell them and when they can be traded. This might include those instances when a shareholder is reluctant to sell.
– Deciding what happens when new shares can be issued by the Company.
– Controlling how your shareholding is valued when you sell the business and creating a dispute resolution process if the value cannot be agreed.
– Clearly specifying which decisions affecting the management of the Company will require the agreement of all Shareholders before they can be acted on.
– Identifying the powers of non-owner Company Directors, and specifying how these powers can be used for the advantage of the Company and its shareholders.
– Specifying what will happen if a shareholder becomes unwell and is thus unable to play a role in an owner-managed business.
– Regulating the decision-making process of the company so that it remains efficient, yet requires no unnecessary administration, but also ensures that the shareholders are kept in touch with the business.
– Laying out a procedure to follow if no decision can be reached on how to run the company. If no such procedure exists, a deadlock could have an adverse affect on the business, and possibly even be the cause of its collapse. Having such a process in the Shareholder Agreement could help the owners through such a situation.

Should I set up a Shareholders’ Agreement straight away?

When starting a business with other people, particularly if you invest in an ‘off the shelf’ company, you might feel that a Shareholders’ Agreement is not at the top of your priority list. However, putting it off until the company is turning a profit could prove dangerous should the owners fall out or want to sell – you will have no procedures in place to fall back on.

A Shareholders’ Agreement can be set up at any time in a Company’s development. You can review and revise it (by agreement) as the needs of yourselves and the business grow, and you can even limit the length of time that it exists, for example 3 years, before it is renegotiated to reflect your current situation.

If you think that a Shareholders’ Agreement would benefit you or would like to review one already in place, contact an experienced business law solicitor who will be able to discuss with you exactly how such a shareholder agreement could help your business.

Bonallack & Bishop are a firm of Salisbury commercial law solicitors who have extensive experience in preparing Shareholder Agreements. Tim is the senior partner of the firm and has led its expansion by 1000% in the last 12 years. All major and strategic decisions are made by Tim who views himself as a business entrepreneur first, lawyer second.