A Shareholder Agreement is used in the following situations:
Â Â Â -Â when a third party wishes to invest in your company
Â Â Â -Â where two or more individuals own the entire issued share capital of a private limited company between them
Â Â Â -Â where one or more founder entrepreneurs are setting up a company.
Why use them?
Shareholder Agreements are essential as they are designed to regulate the relationship of the shareholders towards each other, in a similar way as a partnership deed would do between the partners of a partnership. Every company should therefore have one.
What do they contain?
Shareholder Agreements primarily deal with the following areas:
Â Â Â -Â how often there should be shareholder’s meetings
Â Â Â -Â who should chair the meetings
Â Â Â -Â how to place restrictions on the company’s management/board (for example issues such as creating charges on the company’s assets, borrowing money, employment, appointment and dismissal of directors, etc)
Â Â Â -Â Voting rights
Â Â Â -Â ‘VetoÂ items which prevent certain actions taking place without an agreed level of shareholder consent.
Â Â Â -Â the sale of shares
Â Â Â -Â the transfer of shares – if one shareholder wishes to transfer shares he has to give the other shareholder the option to acquire them first.
Shareholders agreements are bespoke legal documents that can be drafted to deal with simple or complex issues depending on the specific requirements of the company.
If you need a Shareholder Agreement, get in touch with our Commercial Department, and speak to one of our solicitors who will be happy to help.