A Shareholders Agreement is essentially a contract between the shareholders of a company. This differs from a company’s Articles of Association. Though the Articles of Association will act as a company’s constitutional document, a Shareholders Agreement is regularly used a supplementary document, extending the provisions provided under the Articles of Association (or even overriding them). Areas covered by a Shareholders Agreement may be as follows:
- Issuing and transfer of shares, including provisions on death of a shareholder
- The methods by which, on sale, the shares will be valued
- Matters requiring unanimous decisions
- Resolving disputes between the shareholders (in the absence of a Shareholders Agreement dealing with dispute procedures, disagreements between the shareholders can often result in lengthy negotiation, which can prove costly)
- Restrictions on existing shareholders to prevent them working for a competitor or “poaching” other members of staff, following their exit from the company
- Provide additional protection to minority shareholders and certainty to majority shareholders
Another major perceived benefit of a Shareholders Agreement is that, unlike Articles of Association (which are published and freely available at Companies House), Shareholders Agreements are a private document between the parties to the agreement. This enables Shareholders Agreements to contain confidential information relating to the inner workings of a business, in the knowledge that such information should be free from the eyes of the public.
Please contact Andrew Tzialli on 020 8422 5678 or by email at Andrew.Tzialli@haroldbenjamin.com for further information.
