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Shareholders’ agreements: do you need one?

Whether you are starting a new venture or operating an existing business, it is important to consider your relationships with the other people involved.

A shareholders’ agreement may not seem relevant to you right now, particularly if you have gone into business with family or friends you trust. However, situations can quickly escalate, and if the relationships soured in the future or the dynamics changed, a shareholders’ agreement can provide the shareholders, and the company, with protection.

In addition to helping to avoid or resolve costly disputes, a shareholders’ agreement can govern how the company is run, regulate the sale of shares and define how important decisions will be made.

Tailored to the needs of the company and the shareholders, an agreement can set out:

  • Shareholder rights and obligations
  • How the company should be run
  • How shares in the company can be transferred and issued
  • Matters and decisions requiring shareholder consent (providing protection for minority shareholders)
  • Restrictions on shareholders to be engaged or employed by any other business
  • What happens if specific events occur (for example a dispute between the shareholders)

Although it is not a legal requirement for a limited company to have a shareholders’ agreement, the protection offered can be invaluable. It is usually best to put an agreement in place when the company is first set up, however, it is never too late to formalise one. Drawing together the expectations of the shareholders and documenting the mutual arrangements can help to create a stable foundation for future decisions and strategies to be formed.

If you are a business owner and need a bespoke, shareholders agreement for your business, then contact GA Solicitors’ experienced commercial team today. Email enquiries@GAsolicitors.com or call 01752 203500.

By James Peterson, Head of Company Commercial at GA Solicitors

James Peterson

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