Whenever two or more people hold shares in a company they ought to, irrespective of whether they are a majority shareholder, a minority shareholder or equal 50/50 shareholders, put in place a shareholders’ agreement to govern their relationship. Failure to do so means that the relationship between the shareholders and the company will be governed by default provisions in the Companies Act 2006 or model articles of association, neither of which is tailored for individual circumstances. Dependence on the default provisions usually results in unexpected and unwelcome outcomes, which can be costly to resolve.
How we help…
At Tollers we provide expert help on shareholders’ agreements at every stage of the process to ensure your intentions are clearly set out and fully catered for. We will guide you through the tough questions that need to be considered and provide you with effective solutions to the issues that arise. Typically, there is no “one size fits all” solution with shareholders’ agreements. We do not use long and confusing questionnaires, instead, we discuss options and advise clients on what will work best for them.
Shareholders’ agreements are very important because they provide the framework for the ongoing collaboration between the shareholders. They take time to negotiate and require serious management attention. Questions of “what if …?” can be constructive. If properly organised the process of settling the legal documentation can contribute greatly to the establishment by the parties of a firm foundation for their future business relationship.
What is a shareholder agreement?
The shareholders’ agreement is the main agreement and sets out the commercial arrangements between the shareholders in relation to the company. It may be supplemented by bespoke articles of association for the company. A typical shareholders’ agreement will deal with:
- Object and scope of the venture
- Contribution of assets
- The composition of the board and the appointment and removal of directors
- Dividend policy
- Transfers of shares, both voluntary and compulsory (for example death or default)
- Minority protection, the right to veto certain decisions.
- Deadlock resolution procedure
- Drag along and tag along rights
- Restrictive covenants on the shareholders
Talk to Tollers
If you would like to put a Shareholder Agreement in place… Talk to Tollers, our specialist commercial solicitors are on hand to guide you through the process.