Shareholder Agreements

A Shareholder Agreement is what every company that has more than one shareholder should have as a security as it can be very helpful in the future. It is a document relating to the ownership and management of the company which has to be signed by all shareholders.  It contains the particular rules by which the ownership of a company is held and as a private arrangement between the shareholders helps avoid problems in running the company. As any private limited company regulated by the Companies Act 2006, any disagreement needs to be decided by the Court and this can be very costly and cannot always go according to your plans.

The most usual situations where you may need a Shareholder Agreement:

• A small number of people all work together and wish to arrange for decisions to be taken unanimously, or nearly so;
• Some shareholders are not directors and therefore are not in any position to control the company's affairs outside of a general meeting.  This may arise either because the shareholder does not want the burden of director responsibility or because he is not invited to be a director;
• One shareholder has lent money to the company, and has no personal involvement in management.
• Shareholders have formed a company for a specific joint venture.  When the venture is -completed, they will wind up the company.
• The usual way to regulate the relationship between shareholders and to set out the limits of freedom of director-shareholders is through a shareholders agreement.  Whereas the structure and operation of a company is set out by statute in very precise terms, the shareholders can agree virtually anything among themselves.  What you put into a shareholders agreement is therefore entirely up to you.  The starting point for your shareholders agreement should therefore be a "wish list" or agenda of agreed points.

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