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Shareholder Agreements

A shareholders’ agreement is an agreement between all or some of the shareholders in a company, and can govern the way the company is run. It can regulate the following matters :

Management of the company

Ownership of the shares and voting rights

Share sales and valuation

Dividend policy

Protection of the shareholders

What should happen on the death of a shareholder

What could happen if a shareholder gets divorced

What should happen if there is a dispute between shareholders that cannot be resolved between them

How the company finances should be managed

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Importance of a Shareholders Agreement

In the absence of a shareholders’ agreement, there is potential for disagreements and disputes. When a company is started, the shareholders are at one and usually, the relationship between them is good. As the company business develops and evolves, it can lead to strain and eventually disagreements and disputes. If there is no shareholders’ agreement, this may mean the expense of mediation or litigation if matters cannot be resolved. A formal agreement can anticipate such matters in advance and set out the process to get matters resolved as quickly and inexpensively as possible.


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