UNIQUE SHAREHOLDER AGREEMENTS
A shareholder agreement is a legal document traditionally drafted upon the formation of a new business, protecting the individual investments of the shareholders of a company and outlining how that company is to be managed.
Whether you have two shareholders or twenty, a shareholder’s agreement should be a key document in place within any company to provide protection for the members and regulation of their dealings.
Our experts at Taylor Rose TTKW understand the importance of protecting shareholder interests, be it an equal, majority or minority holding, and are able to provide advice on the shareholders’ privileges and rights in relation to the management of the company as a whole.
A shareholders’ agreement is an agreement between the shareholders or members of a company, entered into with the purpose of protecting the shareholders’ investment, establishing a fair relationship between them and governing how the company is run. They can also provide for valuation of shares in the event of an exit, set out the terms of any dividend policy to be implemented and provide for resolution of disputes between shareholders.
The agreements are beneficial both to minority and majority shareholders.
Without a shareholders’ agreement, a minority shareholder will generally on their own have little control or say in the running of the company.
For minority shareholders, having an agreement in place means that the majority shareholders can be required to take decisions with the approval of the minority shareholders by including a list of “reserved matters” for which a specific % of shareholders must vote to approve before action can be taken e.g. setting up a new subsidiary, taking additional finance or merging with another company.
In addition, provisions can be included to ensure minority shareholders receive the same return on their investment as majority shareholders in the event of a sale to a third party where they have not been included in the negotiations.
For majority shareholders, benefits include the ability to add provisions allowing them to negotiate a sale to a third party and realise their investment, and to then require the minority to sell to the third party rather than obstruct a sale. Further protections can be added to protect confidential information from being disclosed, prevent minorities from setting up competing businesses and from poaching customers/employees.
At Taylor Rose, we can advise and assist with putting in place new or updating existing agreements, as well as providing guidance on the following areas:
- Shareholder protection for both majority and minority shareholders;
- Reviewing and advising on equity arrangements and valuation mechanisms;
- Shareholder restrictions;
- Share transfer provisions; and
- Procedures for sale of shares.
EVERY SHAREHOLDERS AGREEMENT WILL BE UNIQUE DEPENDING ON COMPANY REQUIREMENTS
Every shareholders agreement will be unique depending on company requirements and so it is essential to employ a team of experienced corporate Solicitors that draft a document based on the assessment of your business needs, to support and protect shareholders now and in the future.
For more information on how we can assist with protecting you and your business, please contact us at email@example.com
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