Ask the Expert

1. What is a shareholders’ agreement?

A shareholders’ agreement is a legally binding document that outlines the rights and responsibilities of shareholders in a company. It typically covers issues such as ownership percentages, decision-making processes, dividend distribution, dispute resolution, and transfer of shares.

The agreement helps maintain clarity, protect shareholders' interests, and govern the relationship between shareholders to ensure a smooth operation of the company.

2. Why do I need a shareholders’ agreement?

A shareholders' agreement is extremely important for the protection of the interests of all parties involved in the ownership of the company. It clarifies shareholders' rights and obligations, outlines decision-making processes, and addresses potential disputes. By establishing rules for ownership transfer, dividend distribution, and confidentiality, it ensures a smooth operation of the business.

The agreement helps prevent conflicts, provides a clear framework for resolving disputes, and maintains a cohesive vision among shareholders, fostering a stable and successful business environment.

3. What should a shareholders’ agreement include?

A comprehensive shareholders' agreement should cover aspects such as shareholders' rights and responsibilities, ownership percentages, decision-making procedures, dividend policies, dispute resolution mechanisms, restrictions on share transfers, confidentiality clauses, and the management of the company. It should also address matters related to board representation, exit strategies, non-compete provisions, and the procedures to amend the agreement.

A well-drafted agreement ensures clarity, safeguards interests, and facilitates smooth collaboration among shareholders.

4. What happens if the shareholders want to amend the agreement?

If shareholders wish to amend the shareholders' agreement, they must follow the procedures outlined in the existing agreement. Typically, this involves written consent from a specified majority of shareholders, often requiring a majority vote. Once the required approval is obtained, the amendment becomes effective and legally binding.

The updated agreement will then govern the rights and obligations of the shareholders, reflecting the changes made and ensuring continued clarity and adherence to the new terms.

5. What happens if there is a breach of the shareholders’ agreement?

If there is a breach of the shareholders' agreement, the affected party may seek legal advice. The non-breaching party can file a claim to enforce the agreement's terms and claim damages. Remedies may include specific performance, where the Court orders the breaching party to fulfil their obligations, or compensation for any losses incurred. In some cases, the agreement may also include provisions for alternative dispute resolution, such as mediation or arbitration, to resolve the breach amicably.

6. Who should sign the shareholders’ agreement?

All shareholders of the company should sign the shareholders' agreement. This includes both existing shareholders when the agreement is created and any future shareholders who acquire ownership in the company.

Signing the agreement ensures that all parties are bound by its terms and conditions, fostering a cohesive and legally binding framework for the business.

7. What are tag-along and drag-along rights?

Tag-along rights give minority shareholders the option to join in on a sale of a significant portion of the company's shares, allowing them to sell their shares on the same terms.

Drag-along rights enable majority shareholders to force minority shareholders to sell their shares along with them during a sale to a third party.

Navigating Generations in the Workplace: why generational labelling can be counterproductive

The literature and the media are full of generational stereotypes and labels, GenZ the digital natives, Millennials the me, myself and I generation, GenX the MTV generation, and the Boomers, the rebellious ones, who championed so many things from equality movements to sexual liberation and unprecedented wealth generation.

Yet labelling is such an inadequate and lazy way of looking at things. Useful perhaps for tabloid newspaper headlines and marketing purposes. Occasionally, it can be helpful as a shorthand to illustrate the very real distinctions in how the generations relate to the world and one another. Yet even this can be fraught with misinterpretation, as a young Millennial from India probably has more in common with an American baby boomer than you’d guess.

In many companies, generational labels are used for development purposes, reward, and benefit expectation but also for the design of leadership development programmes. Does it work…mostly it doesn’t.

One would expect GenZ not to show so much interest in pensions plans and health plans – but don’t bet on it – they are interested in much the same things as their older counterparts. It is a fact that people who chose to work for a specific company have a lot more in common across age and generation boundaries than one would expect. For example, a 70-year-old and a 25-year-old in the same energy company are much more closely aligned, than any GenZ engineer has with, say, a GenZ yoga teacher.

Common interests, lifestyles and professional challenges are much more important in a work context than generational labeling. We have seen many Boomers happily work for Millennials. They key is being blind to stereotypes and working together for a shared, compelling purpose. This is where we’ve found that those that have built deep career experience but are unburdened by labelling dogma, possess an extraordinary transgenerational superpower.

We think organisations should put the emphasis on values, quality of teams, and togetherness. Draw out what people have in common, rather than build generational walls. At the end of the day in any organisation the work to be done must bind people together. As Einstein once said, “Work is the only thing the gives meaning to life,” and thus work is what gives purpose to everyone irrespective of generation.