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Shareholders' Agreement & Articles Checklist
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Shareholders' Agreement & Articles | Checklist
Shareholders' Agreement & Articles Checklist When shareholders are setting up and/or investing in a company, there are various rights and protections they may want or need. These rights and protection should be set out in a shareholders’ agreement (a private document only available to those who are party to it) and the company’s articles of association (part of the company’s constitution, which is required to be filed at Companies House so that it can be accessed by the public). The below is a list of issues that the shareholders of a company may wish to consider for the basis of a shareholders’ agreement and articles of association.
John Egan Associate Partner | Corporate john.egan@laytons.com +44 (0)20 7842 8000
Kathryn Beasley Solicitor | Corporate kathryn.beasley@laytons.com +44 (0)20 7842 8000
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Shareholders' Agreement & Articles | Checklist
Company Details Existing issued shares Existing shareholders Proposed new shareholders
Full name(s) and address(es):
(if any) Number of shares: Price per share: Business description
Board Directors (now) New Directors (if any) Right of any shareholders to
Yes/No
be directors If yes, which shareholders will have the right? If yes, will there be a minimum % shareholding required to have board representation and if yes what %? If yes, will those shareholder directors also be employees? If yes, will their right continue if the shareholder ceases to be an employee? If yes, will the right be given to named directors only as opposed to a future holder of shares? e.g. transfer of shares on death
Regularity of Board meetings Monthly/quarterly? Notice period for board meetings? At least 5 days?
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Shareholders' Agreement & Articles | Checklist
Board Quorum for Board meetings
Select one:
2 directors Other (if so, please stand)
Chairman (if any) Chairman casting vote
Yes/No
Board decisions
Simple majority?
Shares Class and nominal value Voting rights
1 vote per share
Dividend rights
in proportion to shareholdings
Right to capital on exit
in proportion to shareholdings
Rights to capital on a return
in proportion to shareholdings
of assets or liquidation Share Option Pool
Will a proportion of the Company’s diluted share capital be set aside for granting share options to incentivise employees?
Dividend Policy Any specific dividend policy?
Yes/No
Dividend policy details
It is the intention to distribute
% of distributable profits.
Timing of distribution to be specified? e.g. within 3 months of year end?
Ability to pay interim dividends? Other details? e.g. period of time when no dividends paid; certain liabilities to before repaid before any dividends.
If yes, will the right be given to named directors only as opposed to a future holder of shares? e.g. transfer of shares on death
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Shareholders' Agreement & Articles | Checklist
Rights to information Accounts
Yes/No, right to see unabbreviated annual accounts If yes, within
Management Accounts
months of year end.
Should these be provided to shareholder, Yes/No? Frequency?
Any other specific information
Yes/No
Matters requiring consent Matters requiring consent
Are there certain matters that require consent to be given by others before the Company/Board can carry out those matters?
Monetary values
Will transactions or contracts over a certain value require the consent of others before the Company/Board can enter into them?
Level of consent required
Board Approval OR Shareholder Consent? e.g. 75% of A shares OR All shareholders OR Mixture
Employment Contracts New service agreements
Yes/No
or employment contracts required?
Undertakings to be given Work exclusively for Company Yes/No (if No, please provide details): Promote best interests of
Yes/No
Company Ensure all business
Yes/No
developments go through Company Duty not to disclose confidential information
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Yes/No
Shareholders' Agreement & Articles | Checklist
Restrictive covenants Applicability
All shareholders?
Non-compete
Yes/No
Non-solicitation restriction of Yes/No customers, clients, suppliers, agents or distributors Non-solicitation of
Yes/No (If yes – All employees? OR Key employees?)
employees Duration
Whilst party is a shareholder/director/employee/consultant – Yes. PLUS months after party ceases to be shareholder/director/employee/consultant.
Issue of new shares Pre-emption rights
Yes, so new shares are offered to shareholders in proportion to shareholdings before issue.
Exclusion of pre-emption
Yes, if approval by:
right
• • •
special resolution (75%)? shareholders together holding the shares? other
% of
Transfer of shares Transfer Restriction
Yes/No
Pre-emption rights
Yes, so shares are offered to existing shareholders in proportion to shareholdings before transfer.
Exclusion of pre-emption
Yes, if approval by:
right
• • •
Drag along rights
special resolution (75%)? shareholders together holding the shares? other
% of
Yes/No. If holders of
% of the Shares agree to sell they can compel the
remaining shareholders to sell their shares on the same terms. Tag along rights
Yes/No. If holders of
% of the Shares agree to sell they can compel the
remaining shareholders to sell their shares on the same terms.
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Shareholders' Agreement & Articles | Checklist
Compulsory share offer Good Leaver/Bad Leaver
Will there be Good Leaver and Bad Leaver provisions requiring a shareholder to transfer their share if they leave? Yes/No Consider in what circumstance you would like to class a shareholder as a Good Leaver, and those as a Bad Leaver. To incentivise shareholders to stay, should they be automatically classed as Bad Leavers if they leave within a certain time period?
Applicability of compulsory
All shareholders? Yes/No
transfers Exclusion of compulsory offer
No/Yes by board resolution/shareholder majority?
Bankruptcy
Trigger compulsory transfer? Yes/No
% of shares?
Applicable to all shareholders? Yes/No Number of Shares
Should all the Shares have to be transferred, or just a proportion?
Price
Bad Leaver – shares to be offered at nominal value or issue price Good Leaver – shares to be offered at fair value
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Shareholders' Agreement & Articles | Checklist
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