Shareholders' Agreements
A company's statutory rules dictating how it should operate are usually set out in its Memorandum and Articles of Association. These address the main issues that all Companies have to observe, but it is up to the Shareholders to decide whether the standard way of doing things is for them or not. If the Shareholders want variations to suit them then these variations should be contained in writing in a Shareholders' Agreement. No two Companies are identical and there is often "an understandin" as to how things will go if certain circumstances arise.
This could be a recipe for problems and can be resolved at the outset with a Shareholders' Agreement.
Directors look after the day to day running of the business but major issues that should be subject to a discussion among the Shareholders can be set out in a Shareholders' Agreement.
The following are some of the matters that may need to be considered:
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Is the business run to pay all profits to Shareholders each year or is the intention to retain some profits in the Company?
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What remuneration will Directors receive?
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Which Bank/Auditor/Solicitor will the Company use?
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What if one Shareholder leaves the employment of the Company?
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What if a Shareholder dies? What does his or her Will say? Do the other Shareholders know what he or she wished in the Will?
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What if a Shareholder wants to sell?
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Will newly issued shares be offered to existing Shareholders before being offered outside the Company?
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Which matters require unanimity or a specified majority?
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How will deadlocks be resolved?
These are the sort of issues that should be included in a Shareholders' Agreement.
Each case will depend upon its own facts and it is sensible to seek appropriate advice before taking action.
If you would like any further information or specialist professional advice in relation to Shareholders’ Agreements or any other Company Commercial Law matters, please contact either Geoff Hindle or Chris Clifton-Moore on 01273 323231.
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