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
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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