Shareholders Agreement: protecting your company
10 January 2020
Many business owners set up a company with friends or family thinking that they will never fall out. Sadly this is not always the case and the absence of a shareholders agreement can often result in a stale mate position for a 50/50 split and/or a costly exercise with solicitors in order to achieve a conclusion if one can be made at all. Therefore not only are relationships destroyed but funds have to be found to fight a legal battle and a successful business can be destroyed quicker than the efforts it took to build it in the first place.
How will it protect me?
A shareholders agreement can help alleviate issues in the future and whilst this is an additional expense at the outset, it is likely be less costly than the fallout later on. It is also more likely that you will be able to agree on the contents for a shareholders agreement at the outset rather than when doubts start to set in.
This agreement is between the shareholders of the company and it sets to provide a fair treatment and protection for all shareholders including those with a minority holding. Not all shareholders have to be included although it would make sense that they are, as someone with a small holding can be as disruptive as someone with a larger holding.
What should it include?
- specific rights and obligations that affect the shareholders
- rules in respect of the sale of shares in the company including the valuation techniques to be applied
- definitions on how the company is going to be run on short term and long term basis
- prescribed format on how decisions are made including simple day to day ones and those of a more strategic or financial nature
It is easy to say it will never happen to me but experience says it happens to someone and that person could be you.
Whilst Same-Day are not able to draw up a shareholders agreement, we have connections with trusted legal advisors that will be able to help you.