As commercial solicitors we know that for a business starting up, spending money and time on an agreement which you think you won’t ever need is something you don’t want to consider. However, where clients have failed to put in place adequate protection and subsequently fall out, litigating the shareholder dispute can be costly and lengthy and can in turn damage the interest of the business – it does however keep put litigation solicitors busy.
When entering into business as a company, it is an imperative that you have a shareholders agreement in place. It is a vital document and one which no company can afford to go without. A shareholders agreement can vary depending on the nature of the business and the people involved, but it allows for it to set out from day one how the company is to be run. It can cover the following areas:
- What rights are attached to the shares? Do all the shareholders have the same rights and if not, should they each have a different class of shares? Some shares might have a right to vote attached to them, others may not.
- On issuing shares, do the current shareholders have a right to be issued with those new shares (known as a right of pre-emption).
- Can shareholders transfer their shares as they wish without other shareholders’ permission or should a shareholder only be able to transfer to family members or family trusts and by agreement with the other shareholders?
- Who has the right to appoint a director or all the shareholders going to be appointed as directors? If a director resigns, should they automatically cease to hold any shares?
- Who should be appointed as chair of the Board of directors? Should they have a casting vote?
- When should board meetings take place? How many directors should be present at a board meeting for decisions to be made?
- What decisions can be made by the directors without the consent of the shareholders?
- How many shareholders need to be present at a meeting of the shareholders for a decision to be made?
- What decisions require the consent or all or a majority of shareholders?
- What should happen if a majority shareholder receives an offer to buy his shares – should the other shareholders be dragged into the same deal to sell their shares?
- What happens when a shareholder wants to sell – who can he sell too and for what price?
- What should happen if a shareholder dies?
- Most importantly, what should happen when the shareholders are at deadlock and cannot make a decision?
Please call 08452252635 to discuss with our business solicitors to discuss putting in place shareholders agreement tailored to your company.