The Importance of a Shareholders Agreement

Conference room with documents on the table

The importance of a shareholders agreement should never be underestimated. Unlike a company’s articles of association which is a matter of public record, a shareholders agreement remains a confidential agreement between the shareholders of the company.

A shareholders agreement sets out the rules upon which the directors and shareholders carry on the business of the company and can include procedures on how decisions are made.

One of the reasons many companies do not have a shareholders agreement in place is the potential cost. However, given the breadth of areas that a shareholders agreement can cover, this cost is often quickly outweighed if a dispute is avoided or a procedure easily followed.

Shareholders agreement should be considered by all limited companies from 2 shareholder SMEs to a multi-shareholder multi million pound turnover company. The flexibility of a tailored agreement can be used to:

  • Set out a list of reserved matters, which gives shareholders control over certain fundamental decisions that affect the Company. This can also assist in protecting minority shareholders;
  • Clarify the dividend policy of the Company;
  • Set out a dispute resolution procedure to minimise costs and prevent lengthy court cases as far as possible;
  • Control how shares are transferred, this can also cover off transfer provisions in the event of death, critical illness, bankruptcy, divorce or separation;
  • Confirming the position in the event that an offer is made to purchase the shares or assets of the Company; or
  • Place restrictions on shareholders with a view to preventing them competing with the company in the event that they transfer their shares.

If the time is right for a shareholders agreement, or a review of your company’s current shareholder arrangements, please contact Danielle Collett-Bruce on 01483 887653 or via email at dcb@hartbrown.co.uk.

 

This is not legal advice; it is intended to provide information of general interest about current legal issues.

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Danielle Collett-Bruce

Senior Solicitor, Commercial & Corporate

Danielle advises on mergers and acquisitions, new business ventures, corporate structures and joint ventures, investments, company law, governance and procedure. Danielle has recently advised on...

Senior Solicitor, Commercial & Corporate

Danielle Collett-Bruce

Danielle advises on mergers and acquisitions, new business ventures, corporate structures and joint ventures, investments, company law, governance and procedure.

Danielle has recently advised on transactions in a broad range of sectors, including leisure and tourism, technology, media & telecommunications, transport & logistics, childcare & education, IT & software and energy & utilities and for a wide range of clients, ranging from small family-run businesses and mid-market companies to larger corporates.

Danielle is known for her client focus, clarity and pragmatic approach and was named as LawNet’s Young Lawyer of the Year 2016/2017.

Danielle has lived in the Surrey area for her whole life studying law at University of Reading and the College of Law in Guildford. Danielle trained with Hart Brown, and since qualification in 2014, has specialised in Commercial & Corporate work.

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