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Shareholder Agreement - just
£117.50 inc VAT
What is a Shareholder Agreement?
A Shareholder Agreement is a document which
every company with more than one shareholder should have. It contains
the rules by which the ownership of a company is held and in general
terms:
- provides a basis for the resolution of disputes
- confirms the powers of the shareholders in
the company
- prevents the situation where changes in one
shareholder’s personal circumstances can have an effect
on the company or other shareholders within the company
- sets out the limits and procedures for how
the company is to be operated
Whilst it doesn't replace the Memorandum and
Articles of Association, a Shareholder Agreement could be of crucial
importance in any company where there is more than one shareholder.
This may be even more significant where shareholders are also family
members. The agreement is there to ensure that decisions are taken
by consensus and discussion rather than unilateral imposition. It
will provide clarity and certainty as to what can or cannot be done,
resulting in a reduction of the areas in which there might be conflict.
Why have a Shareholder Agreement?
By having a Shareholders' Agreement the situation
where changes in one shareholder’s personal circumstances
can have an effect on the company or other shareholders within the
company is prevented.
A Shareholder Agreement also provides a level
of protection for all of the parties involved in the ownership of
the company against the actions of the others.
Typically shareholders rely on common sense
and tolerance of others to resolve matters; they may well be family
members or long-term friends. In either situation anything that
can be done to reduce the possibility of conflict is a good thing.
It is common for a newly formed company to be
run in the initial stages more like a Partnership. This however
is not a suitable basis on which to continue operation as it grows
and matures; there is a need for structure and a Shareholders' Agreement
is one of the cornerstones of the company.
While there is a lot to consider when starting
a new company, it is prudent to take a longer-term view for the
future. The mere formation of a company is relatively simple to
achieve and allows one to start trading, it does not however confirm
what responsibilities and more particularly the limits of responsibilities
of the shareholders (owners) are.
However, for the four questions below a Shareholder
Agreement will remove and resolve potentially damaging issues:
(1) What happens if shareholders fall out?
Common sense and tolerance may not be enough
to end a dispute and specific agreed actions are called for. A Shareholder
Agreement will force an end to a dispute, by providing a structure
within which the parties have to abide, in the event of a stalemate
situation being reached, then a Shareholder Agreement will provide
a dissolution procedure to allow the parties to go their own ways.
(2) What happens if a majority shareholder
dies or is divorced?
The spouse of the shareholder may take his/her
place. Is this what the other shareholders want? A Shareholder Agreement
will provide a mechanism by which the other shareholders have first
right of refusal to purchase the deceased’s shares.
In the case of a shareholder getting divorced,
would they wish to be joined for board meetings by a former spouse
who may well be hostile? An Agreement can prevent this.
(3) Can you sell your shares to anyone?
Without a Shareholder Agreement you may –
this may not be in the best interests of the company. A common provision
is a right of first refusal. This means that if a shareholder obtains
a commitment from an outsider to purchase shares, the shares have
to be offered under the same terms to the existing shareholders
for a specified period. If the other shareholders do not want shares
to go to the outsider, they merely have to match the price and purchase.
This will ensure that the on-going shareholders
cannot have an un-welcome partner foisted upon them, to their detriment.
(4) Are any financial limits set?
Without a formal Shareholder Agreement, it is
possible for your fellow shareholders to agree a contract on behalf
of the company no matter what the terms. With an Agreement in place
this cannot happen or it will not be binding on the company as the
person in question will have exceeded their responsibilities.
Having control on an individual’s
ability to acquire commitments on behalf of a company is of paramount
importance, to ensure the smooth and profitable running of the company.
How much does it cost?
A standard Shareholder Agreement costs
just
£117.50 inc VAT
- a small price to pay for peace of mind.
How do I proceed?
Click the "place order now button"
to take you to our secure online ordering page. Here you can pay
by credit card or alternatively by invoice for your Shareholders
Agreement. Once your payment has been processed you will then receive
an email with a a
short questionnaire for you to complete. We require answers
to these questions in order to tailor your Shareholders' Agreement
correctly. Please return this to Nicola.Smith@companyregistrations.com.

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