UNIQUE SHAREHOLDER AGREEMENTS
A shareholder’s agreement is a legal document traditionally drafted upon the formation of a new business. This agreement protects the individual’s investments and outlines how that company is to be managed.
DO YOU NEED ADVICE?
Whether you have two shareholders or twenty, a shareholder's agreement should be a key document. This will provide protection for members and regulations for their dealings.
Our experts at Taylor Rose understand the importance of protecting shareholder interests. Whether this be an equal, majority or minority holding. We are able to provide advice on the shareholders' privileges and rights to the management of the company.
A shareholders' agreement is between the shareholders or members of a company. It is entered into with the purpose of protecting the shareholders' investment. This establishes a fair relationship between them and governs how the company is run.
These agreements can also provide for valuation of shares in the event of an exit. It also sets out the terms of any dividend policy which is to be implemented. These agreements can provide a resolution of disputes between shareholders.
We understand that it is common for disputes to occur, for reasons such as:
- Conflicts of interest
- Personality conflicts
- Differences in option on strategy
- Breach of duty
The agreements are beneficial both to minority and majority shareholders.
A minority shareholder, without a shareholders' agreement will generally have little control or say in running the company.
For minority shareholders having this agreement means that they will be required to approve decisions made by majority shareholders. This is by including a list of "reserved matters". These matters will require a specific percentage of shareholders must vote to approve the action. Matters can include setting up a new subsidiary, taking additional finance or merging with another company.
In addition, provisions can be included to ensure minority shareholders receive the same return on their investment as majority shareholders. This is in the event of a sale to a third party.
For majority shareholders, benefits include the ability to add provisions. This allows them to negotiate a sale to a third party and realise their investment. They would then require the minority to sell to the third party rather than obstruct a sale.
Further protections can be added. This could include protecting confidential information and prevent minorities from setting up their own competing business. It can also prevent those competitors from poaching customers/employees.
EVERY SHAREHOLDERS AGREEMENT WILL BE UNIQUE DEPENDING ON COMPANY REQUIREMENTS
Every shareholders agreement will be unique depending on company requirements. It is essential to have experienced Solicitors to draft a document based on an assessment of your business needs. This is also to support and protect your shareholders now and in the future.
In comparison to an Article of Association a shareholder's agreement has a greater binding effect. The shareholders agreement is a private document, and no changes can be made without a unanimous agreement between all the shareholders.
At Taylor Rose, we can advise and assist with putting in place new or updating existing agreements. We can also provide guidance in the following areas:
- Shareholder protection for both majority and minority shareholders
- Reviewing and advising on equity arrangements and valuation mechanisms;
- Shareholder restrictions;
- Share transfer provisions; and
- Procedures for sale of shares.
DO YOU NEED ADVICE?
For more information on how we can assist with protecting you and your business, please contact us at email@example.com
YOUR SHAREHOLDER AGREEMENTS | COMMERCIAL ADVICE EXPERTS
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