What is a Shareholders’ Agreement/do I need One?

25th October 2011

What is a Shareholders’ Agreement and do I need on

What is a Shareholders’ Agreement?

A Shareholders’ Agreement is an agreement between the shareholders (members) of a company with the intention of helping the smooth running of a company and to prevent disputes between the shareholders about the management of the company. Shareholders’ Agreements will often seek to protect the shareholders’ interests in the company, establish and record an agreed relationship between the shareholders and record the shareholders’ intentions for the company.

There are usually a number of key provisions in the Shareholders’ Agreement which often include the following:-

Sale of Shares

The Shareholders’ Agreement will regulate the sale of shares in the company, including provision as to how to value the shares and for preventing the shares being sold to undesirable third parties.

Veto Rights

The Shareholders’ Agreement will often protect the minority shareholders (who hold less than 50% of the shares in the company), giving them more input in fundamental decisions.

Protecting the Company

The shareholders will agree, if they sell their shares, to protect the company by not setting up rival businesses within a defined area for a period of time and by not poaching staff, customers or interfering with suppliers for a period of time. The shareholders usually also agree to abide by duties of confidentiality.

The Business of the Company

The shareholders will agree the scope of the business that the company can carry on, determine the business plan and select the directors etc.

The Financing of the Company

The shareholders will agree how the company is to be financed, including provisions on the control of the company’s bank accounts and the preparation of management accounts and reports for the shareholders.

If you need further advice about a Shareholders’ Agreement then please contact Daven Naghen on 01775 722261, daven.naghen@maplessolicitors.com or at 23 New Road, Spalding, Lincolnshire PE11 1DH or Gemma Mayer on 01775 722261, gemma.mayer@maplessolicitors.com or at 23 New Road, Spalding, Lincolnshire PE11 1DH.

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Over the last forty years I have cause to deal with many law firms both in a personal and professional capacity, including some ‘top’ London Companies. In all of those dealings I have never found anyone as proactive and so willing to offer help and advice as Jamie Dobbs. During the last two years Jamie guided my parents through the completion of Lasting Powers of Attorney. Helped myself with the use of the LPA and recently dealing with Probate and Estate Administration following their death.

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