Shareholders' Agreements: Why You Need a Shareholders Agreement Prepared by a Solicitor? Have you ever considered entering a business venture with family or friends? Have you ever been invited to subscribe for shares and invest in a company whose future looks promising and bright? If the answer is yes, then you should also consider a shareholders’ agreement to protect your investment and for this purpose you have to consult with a Shareholder Agreement Solicitor who can take care of all the stuff.
What is it?
A shareholders' agreement is a written contract entered into by two or more parties who are shareholders of a limited company. They simply describe the relationship between shareholders.It is a private document that is not disclosed publicly. The company is guided by a set of articles of association and the shareholders’ agreement. Shareholders' agreements can cover everything from regulating directors, dividends, management of the company and how to move shares from one person to another and dispute resolution solutions. Before embarking on an agreement, it would pay to engage a solicitor to ensure that all elements of the agreement are dealt with and amicably agreed between all parties.
Practicalities
The lack of shareholder agreements can cause costly disputes. These agreements are a good guide for shareholders’ and company directors to review shareholders' rights.
When should it be in place?
A shareholders' agreement should be in place just before or when a company is formed and the first shares are issued. It offers a common understanding from the get-go for all concerned. It should be one of the priorities before the business really takes off.
Directors
Directors manage the company's affairs. So it will be a requirement of the agreement to acknowledge that the directors can take decisions that may affect the shareholders. These decisions often involve operating and financing the company and issuing new shares.
Selling shares
Ideally, an agreement will flesh out a shareholder's right to require the company or other shareholders to buy their shares. By doing so, it negates the potential for other shareholders to dilute the value of a shareholding. A suggested clause will mean either the company would have to be sold to realise the share value or shareholders will be forced to make a reasonable offer. A method to work out the value of the company can be drafted into the agreement.
Minority shareholders
For those with a minority shareholding, a shareholders' agreement can help set out when they will have a say in the company's affairs and over what matters and when the majority can make decisions without the minority.
Dividends and dispute resolutions
A shareholders' agreement will help outline what shareholders' rights are to receiving dividends and alsoset out how any potential disputes that may arise between shareholders can be resolved.
Risks
Not putting an agreement together, or even putting together a poorly drafted one, will mean serious problems for shareholders and a great mess that could deflect the company's focus. So it's essential to get the right legal advice to ensure the foundation is laid for the future. As expert solicitors in drafting these agreements we can help you to make sure your concerns are covered and interests are protected. Read More...
Contact Details:Reach us @ www.nathsolicitors.co.uk For any query you can call us on Tel: +44(0) 203 670 5540 Mob:+44 (0) 7545 813 894 E-mail: shubha@nathsolicitors.co.uk