Shareholder Agreements

Lamb & Holmes Commercial Law Department, amongst other things, also specialise in the preparation of Shareholder Agreements.

Quite often circumstances can be complicated and shareholders’ interests could be prejudiced in situations where they hold a minority interest in a business, with no way of influencing decisions agreed by the majority. In these situations, a Shareholder Agreement can be very useful.

In the absence of a properly drafted Agreement, there is always a risk of disruption to you and your business, for example:

  • Unless restricted the Articles of Association,  what happens if a shareholder wishes to sell his/her share to a third party who  you don’t  know or trust, or to someone who wishes to change the direction of the business?
  • Will there be any redress if the majority of shareholders wish to sell their shares, when the minor majority shareholder do not?
  • What arrangements exist if the shareholders fall out or have an unresolved disagreement?
  • What happens if a shareholder dies? Are the provisions set out in the Articles of Association adequate?
  • Should a shareholder be prevented from setting up a competing business?

If you do not have a day to day involvement in your company, do you want a veto on certain decisions?
It is sensible to ensure that there is a common understanding of shareholder expectations within your business.
In addition, matters which might typically be addressed in a Shareholders’ Agreement include:

  • What happens if a shareholder leaves/dies/becomes ill?
  • Shareholders’ rights to appoint directors
  • Voting rights
  • Dividend policy
  • Transfer of shares
  • Valuing shares in the event of a transfer/sale of those shares
  • Disputes
  • Restrictive covenants
  • Drag and tag along rights on the sale of the company
  • Minority shareholder protection

A Shareholder’s Agreement will provide a degree of clarity and direction for all the shareholders by setting out a framework for running the company specific to your particular requirements without necessarily amending the Articles of Association. Whilst the company’s Articles of Association might be adequate for the majority of situations, they are by no means personalised for specific requirements.

You will be provided with a dedicated Solicitor who will work with you to ensure that the Shareholder Agreement specific to the needs of your business and everyone involved.

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