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Shareholders Agreement

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You may need a Shareholders Agreement or Investment Agreement when a third party wishes to invest in your company. Sometimes they can also be appropriate where you and one or more founders are setting up a company. These are highly bespoke and can...

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If you would like to discuss a Shareholders Agreement or Articles of Association, please contact an Everyman Legal Solicitor on 0845 868 0960 for a free discussion or e-mail james.hunt@everymanlegal.com

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Thinking about a Shareholders Agreement and whether you need one? Confused by the alternatives?

A Shareholders Agreement is an agreement made between shareholders of a private company governing the relationship between them and setting out rules on how the company is to be run. Sometimes, these agreements can be appropriate where you are setting up a company with someone else, perhaps even family or friends. You may also need a Shareholders Agreement when a third party wishes to invest in your company. 

Shareholders Agreements are highly bespoke documents that can range from the very simple to the very complex. Such agreements might include clauses that:

  • regulate the issue and transfer of shares in the future – this might include provisions preventing unwanted third parties from acquiring shares;
  • describe how the company is going to be run – this could cover appointing and removing directors, capital expenditure, the provision of management information and payment of dividends; and
  • provide protection for minority shareholders by setting out “veto” items which prevent certain actions taking place without an agreed level of shareholder consent.

There may also be particular provisions that need to be included in your Shareholders Agreement and so legal advice should be sought at an early stage. Everyman Legal can assist you in preparing a Shareholders Agreement that works alongside your Articles of Association of your company to protect both you and your business. 

If you would like to discuss a Shareholders Agreement or Articles of Association, please contact an Everyman Legal Solicitor on 0845 868 0960 for a free discussion or e-mail james.hunt@everymanlegal.com

If you are the majority shareholder – how might a Shareholders Agreement benefit you?

A Shareholders Agreement might include a “drag along” provision allowing you to force a minority shareholder to sell their shares if and when you wanted to sell your shares. This then provides you with the option of Selling your Business at the time most appropriate for you.

In addition, you might want to include a confidentiality provision in order to stop minority shareholders from disclosing information about the company and its business to third parties.

Is there an alternative to a Shareholders Agreement?

You may well find that, rather than using a Shareholders Agreement, you can instead secure all the protection you need through your company’s Articles of Association. These may include many of the same provisions as a Shareholders Agreement, including a drag along provision, so this could save you both time and money.

If you would like to discuss a Shareholders Agreement or Articles of Association, please contact an Everyman Legal Solicitor on 0845 868 0960 for a free discussion or e-mail james.hunt@everymanlegal.com