If you are operating a business in the form of a private limited company, or intend to do so, it is important that arrangements between the shareholders are set out in a formal shareholders’ agreement. Woodfines’ Company Commercial team has a wealth of experience in advising shareholders on the full spectrum of legal issues, including the drafting and review of such agreements.
Why do you need a shareholders’ agreement?
A shareholders’ agreement can be used to govern relations between shareholders in a private company. Such agreements can be used, for example, to ensure that the company only operates in the manner originally envisaged by the shareholders and to put restrictions upon the way shareholders can dispose of or otherwise deal with their shares.
In the event that a shareholders’ agreement is not in place, shareholders may have to rely upon default provisions of the Companies Acts to determine certain issues, such as arrangements on the death or exit of shareholders. It is unlikely that these provisions will properly protect the interests of all or accurately reflect arrangements between the shareholders.
By clarifying and formalising their rights and duties by way of a shareholders’ agreement shareholders stand a stronger chance of avoiding misunderstandings and disputes at a later stage.
Common issues covered by a shareholders' agreement include, for example:
- Entitlements to appoint directors
- Restrictions on the operation of the company’s business
- Entitlements to be appointed director
- Mechanisms requiring the consent of all or certain shareholders in relation to particular actions of the company
- The apportionment of liability for personal guarantees
- Restrictions upon the issue of new shares and transfer of existing shares
- Options for the shareholders to acquire each other's shares in certain circumstances
- The payment of dividends
- Provisions for what is to happen on the retirement, death or incapacity of a shareholder.
What to do next
Woodfines’ Company and Commercial law experts have extensive experience in the drafting of and advising on shareholders’ agreements. We take the time to understand the needs and objectives of our clients and deliver agreements which are tailored accordingly.
For further information, please contact a member of our Company Commercial team.