A Shareholders Agreement will, as far as possible, cater for circumstances such as:
- One shareholder employee retiring and wanting out of the business.
- Circumstances where on shareholder decides to cease operating in the business, leaving it in the hands of the other while still remaining entitled to dividend distributions.
- Almost 50% of marriages end in divorce. Do you plan to be in business with both spouses or just the original one you began the business with?
- The death of a shareholder who is instrumental to the operations of the business.
- Where one shareholder receives a large offer for their parcel of shares, should the other(s) have the right to sell theirs? Should the other(s) be compelled to sell?
A Shareholders Agreement will typically contain provisions:
- Documenting management responsibilities and clarifying what powers are granted to the board.
- Setting out which decisions require a majority or unanimous vote before the company can enter into that transaction.
- Detailing the rights of shareholders to appoint directors.
- Board procedures and operations.
- Obligations relating to further funding or capital raising.
- Grants of pre-emptive rights for shareholders where there are new share issues or transfers.
- Insurance provisions to cater for the purchase of shares from a deceased shareholder.
- Mandatory share transfers where a shareholder defaults, goes AWOL or otherwise acts to the detriment of the company.
- Tag along and drag along rights to facilitate exit strategies.
