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Why should you have a shareholders’ agreement drawn up?


A shareholders’ agreement sets out the legal position between the owners of a limited company.


As companies often have more than one shareholder, agreements are useful in controlling how business is to be conducted. In the event of disputes they clarify matters and also deal with any unexpected events. They provide protection to shareholders for their investment, establishing an agreed relationship between the members.


We always recommend getting a formal agreement in place. Advantages include:

  • providing clarity should shareholders fall out

  • resolving disputes between shareholders

  • ensuring management of the company is regulated

  • offering protection to shareholders, whether these are majority or minor holdings

  • controlling share transfers

  • having the potential to link shareholdings to employment

  • setting out restrictions on the exit of a shareholder

  • providing stability

  • offering the ability to have a varied dividend policy

All shareholders need to take independent advice which applies to their own individual circumstances.

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