Shareholders Agreements
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If you already have, or are about to create, a limited company with multiple shareholders then Apostille & Legalisation Services Ltd can assist by creating a Shareholders’ Agreement to protect the interests of the shareholders (i.e. the owners) of that company.
- Shareholders Agreement Fully Explained
- Steps to take to draw up a Shareholders’ Agreement
- Definitions of Terms
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FREE Shareholders Agreements Guide
What is a Shareholders’ Agreement?
A Shareholders’ Agreement documents areas of agreement between the shareholders of a company and puts in place certain operational and control mechanisms. It is best practice to sign a Shareholders’ Agreement at the time of incorporation of a new company, however a Shareholders’ Agreement can be signed at any time post incorporation.
Why create a Shareholders’ Agreement?
Shareholders’ Agreements are recommended despite the fact that companies are already bound by another contract: the Articles of Association. When a company is first incorporated, the initial shareholders set rules about how the company is to be run by way of the “Memorandum and Articles of Association”, a legal statement signed by all initial shareholders confirming that they agree to form the company and establishing some initial rules.
However, Memorandum and Articles of Association documents (hereafter called the “Articles”) are very generic in nature and are rarely altered or even discussed much by the initial shareholders and whilst they do indeed offer some protection to the shareholders, a Shareholders’ Agreement allows many more control mechanisms to be put in place, and any conditions put into a Shareholders’ Agreement will override anything contradictory in the Articles.
One key distinction between the Articles and a Shareholders’ Agreement is that the Articles are a public document that can be viewed from Companies House whilst a Shareholders’ Agreement is a non-public and confidential document.
Moreover, the Articles may be altered at any time by special resolution of their membership (i.e. 75% of the shareholders). However, just like any other form of contractual agreement, a Shareholders’ Agreement cannot be amended except with the parties consent. Therefore, this effectively means that any attempted variation of a Shareholders’ Agreement will then serve to provide a remedy for a breach of contract whereas a variation of the Articles would not. This is one way in which the interests of minority shareholders may be protected under a Shareholders’ Agreement.
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Key provisions in a Shareholders’ Agreement
A Shareholders’ Agreement will typically include a series of mutual promises by the parties to the agreement on such matters as:
- how the company is to be managed;
- the division of power between the parties;
- the terms for transferring shares;
- how to deal with disputes between the parties;
- what will happen in the event of the death of a shareholder; and
- when and how will the company terminate.
These are just some of the considerations to bear in mind, more detail can be found in our free guide “Considerations when negotiating a Shareholders’ Agreement” which can be downloaded by completing the form found at the top of this page.
For further information and advice, please contact us for a complimentary legal enquiry with our specialist senior commercial solicitor.