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A shareholders’ agreement is an agreement which is entered into by the shareholders of a company (and sometimes the company itself) and seeks to regulate the relationship between the shareholders and clarify certain matters relating to the company and its business.
Having a shareholders' agreement in place is not a statutory requirement. Therefore as shareholders are not legally required to have a shareholders’ agreement in place, and often get along well at the start of their business relationship, preparing a shareholders’ agreement is often overlooked.
Unfortunately the reality is that in some cases the shareholders in a company fall out with each other and business relationships deteriorate over time. This is where the shareholders’ agreement is important. By having a shareholders' agreement in place with appropriate dispute resolution and/or exit provisions included, disputes between shareholders can be settled promptly before they become detrimental to the company's business.
Without a shareholders’ agreement in place, the shareholders will have to carry on the business of the company in accordance with its articles of association, which if not drafted to the company’s bespoke requirements, may not reflect the shareholders’ intentions.
In addition, whilst a company’s articles of association need to be filed at Companies House, meaning they are available to view online by the public, a shareholders’ agreement does not and is a private contractual arrangement between the shareholders (and sometimes the company itself). Therefore shareholders may prefer to have their respective rights and obligations set out in a private agreement.
A shareholders’ agreement should be a bespoke agreement tailored to the shareholders and company’s requirements. Therefore a shareholders’ agreement for one company is unlikely to be suitable for another.
Whilst the shareholders’ agreement is a bespoke agreement, important provisions often included in such an agreement are as follows:
If you would like a shareholders’ agreement prepared for your company, or would like us to review a shareholders’ agreement you have received before entering into it, then please do not hesitate to contact Scott Richardson by phone on 01329 227907 or by email on firstname.lastname@example.org.