A shareholder’s agreement is a contract between the shareholders of a limited company.
Although there is no legal requirement for a shareholders agreement to be entered into we would highly recommend that it is considered as a key documents when incorporating your company. It will usually cover three main areas: protecting the shareholders' investment in the company, establishing clear obligations between the shareholders and governing the running of the company.
- Business of the company – outlines the purpose and function of the company.
- Shareholder obligations – The purpose of this clause is to set out a list of matters which shareholders are obliged to use their powers to prevent the company from undertaking without first obtaining consent of the shareholders. This is a non-exhaustive list which may include provisions on altering share capital, changing the nature of the business and entering into transactions over a certain value or outside of the normal course of business.
- Transfer of shares – outlines the circumstances when a transfer can occur and what consents are necessary for the transaction. You may wish to consider if shares must be first offered for sale to existing shareholders before they are transferred, what happens on the death or a shareholder and if there are restrictions on who shares may be transferred to.
- Dividend Policy – this clause provides for distribution of an annual dividend of a certain percentage of the company's annual profit.
- Directors – clarifies shareholder rights to remove directors, how the appointment or removal of a director should be conducted.
- Termination – establishes how termination of the agreement should be conducted, what clauses will continue after termination and how winding up the company should be conducted.
- Deed of Adherence - Shareholders may include a provision in the agreement which requires any incoming shareholders to become party to the agreement. This is achieved by entering into a deed of adherence of which the form is set out in the agreement.
This is not an exhaustive list of clauses. Each agreement can be tailored to the individual needs of the shareholders. We provide a personal service which takes into consideration the needs of the company and the shareholders to produce an agreement which is desirable for all parties.
In addition to drafting services we are also able to advise shareholders on their obligations under existing agreements and options for alter existing agreements.
To find out more about the legal services we offer or to arrange an appointment, please contact us on 01603 693500 or email us using the 'Make an Enquiry' form on our website. Appointments are available at our Norwich, North Walsham and Sheringham offices.