A shareholder agreement is a written contract that sets out the rights, responsibilities, and obligations of shareholders in a company.
It is an important document that establishes a framework for a privately owned company’s management and governance and provides valuable protection, certainty and clarity for a business’s key stakeholders.
Here, our experienced Commercial Law solicitors answer some frequently asked questions about shareholder agreements.
What is a shareholder agreement?
A shareholder agreement is a legally binding contract between all or some of the shareholders in a company.
It forms the cornerstone of the business relationship between shareholders by regulating their rights and obligations and putting in place a structure for how the company is managed.
Although it is not a legal requirement to have a shareholder agreement, it is definitely encouraged, and every company with more than one shareholder is advised to have one in place.
What should a shareholder agreement include?
Every shareholder agreement is bespoke and should be tailored to the needs of an individual company. Shareholders agreements generally include information about the following:
- Company information. Most shareholder agreements include basic information about a company including its name, registered address, share capital, and directors.
- Shareholders’ rights and obligations. The names, details, and shareholdings of shareholders are included, as well as their respective rights and liabilities.
- Decision making. Shareholders’ agreements can set out how often the board meets and specify how important decisions are made.
- Share management. A shareholder agreement should stipulate what happens to shares in the event of a shareholder’s departure, death, retirement, or bankruptcy. How shares are issued and transferred should also be considered.
- Dispute resolution. Shareholder agreements play a key role in resolving disputes. They should set out how disagreements are resolved and include deadlock resolution provisions if necessary.
- Financing. Information about funding arrangements, a business’s dividend policy, and valuation terms can also be included in a shareholder agreement.
How do you make a shareholder agreement?
Shareholder agreements provide certainty, clarity and protection for shareholders, but only when they are drafted, entered into and executed correctly.
Specialist legal advice is vital.
At Bookers & Bolton, our experienced team will provide commercially astute advice, working alongside you to make you aware of the legal implications of the planned agreement and guiding you through the entire process of producing the document.
If you require advice on drafting a shareholders’ agreement, Bookers & Bolton Solicitors can help. Even if you already have an established business, it is never too late to put one in place.
To speak to one of our reliable, professional shareholders’ agreement law solicitors in Alton, please call 01420 558 335 or email enquiries@bookersandbolton.co.uk. All of our services can be carried out either in person or via online platforms.
What is a shotgun clause in a shareholder agreement?
A shotgun clause (also known as a buy-sell agreement) is a provision that can be included in a shareholder agreement. It is often considered a last resort in the event of a dispute between shareholders that cannot be resolved by negotiation or other means.
A shotgun clause allows a shareholder to buy out or be bought out by the other shareholders at a specified price. It’s typically used when shareholders have similar shareholdings in the company.
What are the benefits of a shareholder agreement?
Some of the main advantages of shareholder agreements include:
- Flexibility. Shareholder agreements don’t have any set requirements and can be drafted, amended and updated to meet a company’s particular needs.
- Confidentiality. There is no obligation for a business to file their shareholder agreement with Companies House, meaning the details of what is agreed cannot be accessed by the public.
- Clarity. A shareholder agreement plays a vital role in defining the terms on which a company is run, ensuring everyone knows where they stand.
- Protection. By including key information about the business and planning for key events in a company’s lifecycle, a shareholder agreement protects its stakeholders and futureproofs a business.
Solicitor for Shareholder Agreements Hampshire
At Bookers & Bolton, our specialist commercial law solicitors in Alton help businesses create robust shareholder agreements tailored to your specific needs.
We will guide you through the entire process, ensuring it is as fast and efficient as possible, providing practical legal advice with a strong commercial perspective.
Our team of shareholder agreement solicitors also have the knowledge and expertise to handle various matters and disputes on behalf of shareholders and investors.
Our shareholders’ agreement solicitors also provide guidance in 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.
- Procedures for sale of shares.
For legal advice from experienced shareholders’ agreement solicitors, please contact us on 01420 558335 or complete a free online enquiry, and we will be in touch.
