The best business advice, opinion, news and expertise in Greater Manchester and further afield.

Friday, 28 September 2012

Friday Guest Blog: Shareholders' Agreements

By Shahid Azam - Associate and Corporate Commercial Solicitor, Clough & Willis

I recently came into contact with a small company with three shareholders who had heard about Shareholders Agreements, but felt that because they agreed on everything, there wasn’t much point in having one drawn up.

A Shareholders Agreement is a specific agreement between shareholders which sets out how they intend dealing with the company. It is private document which is designed to prevent disputes and can plan for any eventualities that may damage the business; for example what would happen in the event of a Shareholder’s death, what if a shareholder who is also a director does not pull their weight, or what the plan would be if someone suffers long term ill health or sickness.

A Shareholders Agreement is also invaluable for those who have less than 51% of the shareholding as it can be agreed that certain key decisions have to receive unanimous agreement. An example of this would be if the company enters into major high value contracts.

They are also vital when a shareholder/director decides that he or she no longer wishes to participate in the management of the company. The Shareholders Agreement would give shareholders the ability to remove their colleague and have them return their shares to the company or to another shareholder.

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