Shareholders Agreement

21st August 2013
Shareholders Agreement image

Shareholders Agreement

Many of us decide to set up a limited company when we go into business, there may be many reasons for choosing this type of business medium but one of the main reasons is it offers you limited personal liability.

If you have started up your company with another party however, no matter how well protected or limited your liability may be to the outside world, you may still encounter major problems in terms of both stress and finances if you later fall out with your fellow shareholders or are unable to agree on a certain point.

Even the best of friends can fall out over business and it is important to remember that just because you all start out with same plan and ambitions in mind that is not necessarily going to remain the case. Many factors can influence how a person chooses to react in their work/ business life, for example family, illness or even just a general change of heart.  The story of starting up a business with a friend and not bothering to put something as formal as a shareholders’ agreement into place and then having a difficult and protracted fallout is all too familiar.

A shareholders’ agreement is essentially a contract between the individual shareholders, it can set out what will happen if certain circumstances arise, what will happen if one of them wishes to leave the business , what share of profits each of the shareholders are entitled to etc . A shareholders’ agreement can be drafted to so that certain issues must have a majority or even unanimous vote in order to proceed.  This is beneficial as often a company has a shareholder with more than 50 % of the shares who can effectively run the company.  If this provision is included, it will protect the minority shareholders from this situation.

If you have worked for years to build up the goodwill of your company and then a key member leaves, the last thing that you would want is for them to set up in competition with your company.   A clause could be inserted into the shareholders’ agreement to prevent this and thus protect the company going forward.

A bank may insist on this type of protection (i.e. a shareholders’ agreement) before offering any funding/credit to a company.  It is such an important and fundamental document.

The shareholders can agree near enough whatever they like between themselves in a shareholders’ agreement. It is a private agreement and does not have to be lodged at Companies’ House and will not be inspected by the public.

A shareholders’ agreement may help prevent a great deal of argument and distress in the future and will ultimately be a cheaper option then taking action in the courts when the company has hit problems as a result of disagreements with the shareholders. You cannot afford to own/manage a business without a shareholders’ agreement.

If you think that a shareholders’ agreement would be beneficial to your company please call Gemma Mayer on 01775 722261 or email gemma.mayer@maplessolicitors.com or write to Gemma at 23 New Road Spalding Lincolnshire PE11 1DH.


Free Wills Month in October image

Free Wills Month in October

Maples are pleased to announce that they are taking part in Free Wills Month throughout October. If you are aged 55 or over you can make your Will for free and have the opportunity to help one or more of the sponsoring charities in the process. Appointments are limited in number and are allocated on a first come first served basis.

For further details please contact a member of our Wills and Probate Department:-

Jane Mawer- jane.mawer@maplessolicitors.com
Jamie Dobbs- jamie.dobbs@maplessolicitors.com
Faye Blair- faye.blair@maplessolcitors.com

Or telephone the office 01775 722261 and ask to speak with one of the team.

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Over the last forty years I have cause to deal with many law firms both in a personal and professional capacity, including some ‘top’ London Companies. In all of those dealings I have never found anyone as proactive and so willing to offer help and advice as Jamie Dobbs. During the last two years Jamie guided my parents through the completion of Lasting Powers of Attorney. Helped myself with the use of the LPA and recently dealing with Probate and Estate Administration following their death.

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