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Shareholders Agreements

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Shareholders’ agreement solicitors

A shareholders agreement helps establish shareholder relationships, manage expectations and prevent disputes further down the line.

This is especially important as organisations, and people, grow and evolve over time. A shareholders agreement will help solidify relationships between shareholders and directors, and is critical to the smooth operation of a business.

Read on to find out more about how we can help you create mutually beneficial shareholder agreements for your business, or contact us today to get bespoke and tailored advice.

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What is a shareholders’ agreement?

A shareholders’ agreement is a contractual agreement between the shareholders of a company.

The ultimate aim of a shareholders’ agreement is to establish trust and openness between all shareholders and steer the direction of future company operations.

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Often, a shareholder’s agreement will include the following:

Rights and obligations

Issuing and transferring shares

Strategic direction

Protection for shareholders

Decision making processes

Paying dividends

Company operations

Dispute resolution procedures

Why should I have a shareholders agreement?

There are many benefits to a shareholders’ agreement. For one a shareholders’ agreement provides protection for minority and majority shareholders, establishes strategic direction, delineates the decision making process, prevents future disputes and regulates shares.

A shareholders’ agreement can help regulate common disputes that arise during the lifecycle of a business, such as decisions over who to sell shares to, whether to sell shares and decision making conflicts.

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Regulatory and Compliance

When should a shareholder’s agreement be formed?

In an ideal world, it’s best to establish a shareholders’ agreement when a company is formed and starts to issue shares.

This helps manage shareholder expectations and steer the direction of the company, which should naturally be agreed at the beginning of an organisation’s journey.

If a shareholders’ agreement is not prioritised at the start, it can allow disagreements and contrasting opinions to prosper. After all, a shareholders’ agreement is principally designed to contractually bind the vision of the shareholders and directors involved.

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How to draft a shareholders’ agreement and do I need a solicitor to do it?

You can draft your own shareholders’ agreement and there are templates available – though templates can be restrictive given how shareholder agreements can concern a wide variety of issues.

It’s always good practice to involve an impartial third party to assist with the draft process. A qualified solicitor who specialises in shareholders’ agreements can advise all parties on what provisions to take and any legal ramifications.

Broadly, the key things to consider when drafting a shareholders’ agreement are as follows:

Things To Consider

Decide which issues the agreement should cover

Agree a framework for the voting power of shareholders

Address shareholder’s interests

Identify who makes decisions

Why choose Spencer Churchill to draft your shareholders’ agreements?

We’re an experienced and dynamic law firm offering experienced and impartial advice on shareholders’ agreements.

We’re specialists in drafting agreement frameworks that help establish and manage shareholder and director relationships from the start of a company’s formation.

Transparent, open and tailored advice is at the heart of what we do. We’ll help you create an agreement that’s not just beneficial to shareholders and directors, but your business as a whole.

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Corporate Law

Shareholders agreements FAQs

Do all shareholders have to sign a shareholders agreement?

In short, no. There may be situations where it’s not necessary for a shareholder to enter an agreement. For instance, if a family has multiple shareholders and disavow voting rights to a single family member.

A shareholders’ agreement is completely voluntary in all circumstances apart from what’s called “deed of adherence”, which is where new shareholders are automatically entered into a pre-existing agreement.

What happens with no shareholders agreement?

If you don’t have a shareholders’ agreement in place it leaves all shareholders and directors exposed to disputes in the future.

Without a shareholders’ agreement, it can lead to deadlocks over decisions, ambiguity and costly delays in the decision making process.

A shareholders’ agreement will give you protection against this as it sets the standard, and guidelines, for the relationship moving forward.

What should a shareholders agreement include?

A shareholders’ agreement changes according to who’s involved, the terms stipulated and other specifics to a business. Broadly, they will cover the following:

  • Rights and obligations
  • Issuing and transferring shares
  • Strategic direction
  • Protection for shareholders
  • Decision making processes
  • Paying dividends
  • Company operations
  • Dispute resolution procedures

Is a shareholders’ agreement legally binding?

As long as the agreement has gone through the contractual process, including: offer, acceptance, consideration and intention, a shareholders’ agreement is then legally binding.

What is a unanimous shareholders agreement?

A unanimous shareholders’ agreement is designed to resolve disagreements between shareholders by establishing a dispute resolution process before the conflict takes place.