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
offering the ability to have a varied dividend policy
All shareholders need to take independent advice which applies to their own individual circumstances.