[vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″ shape_divider_position=”bottom”][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” width=”1/1″ tablet_text_alignment=”default” phone_text_alignment=”default” column_border_width=”none” column_border_style=”solid”][vc_column_text]If you’ve got shareholders within your company, are registering a new business, or are planning a change to your existing structure, a shareholder agreement is a critical part of the process. It needs to encompass several different areas and reflect your stock but there are three key elements that always need to be included.
A shareholder agreement acts as a contract between the shareholders of a company, setting out how the company will be run. They should always be considered when there are multiple shareholders within a business setting, providing a layer of protection and guidance on how you should proceed. While shareholder agreements do vary, their typical aim is to provide protection for all parties against a majority using their voting power, without one, it can lead to a single party wielding full control on issues that affect all shareholders, who would have only a limited say.
With this in mind, what are the areas you need to focus on when putting your shareholder agreement in place?
Majority and minority rights
As already mentioned, setting out the rights of both majority and minority shareholders is the most common reason for a shareholder agreement. As a result, it should allow for the interest of all parties to be represented for decisions that affect all shareholders and, in some specific circumstances, call for a unanimous consent to be reached.
The transfer of shares
Another critical area is how shares can be transferred. In many cases, you don’t want shares to be distributed outside of a certain group or you want to ensure you can vote on shares going to another party. A shareholder agreement should set out to address many variations of this issue, such as what will happen if a shareholder passes away or leaves the company?
Deadlock provisions
No matter how unlikely, you should also set out what will happen in the event that a decision is tied, without this provision it can lead to a long battle and confusion on how you can progress past this point.
Of course, a comprehensive shareholder agreement needs to go beyond these three key areas and be tailored to suit your business model, goals, and future plans. Here at Audley Chaucer, we’re well established within the corporate sector and have been delivering specialist advice to our business clients for decades. If you’re seeking expert advice and clear guidance on your business shareholder agreement, you can contact us today.[/vc_column_text][/vc_column][/vc_row]
