If you operate a company with multiple shareholders, you likely have a shareholders agreement in place. If not, you might like to consider entering into a Shareholders Agreement.
What is a Shareholders Agreement?
In its most basic sense, a Shareholders Agreement can be likened to a governance manual for the company and its shareholders which sets out:
- how the company is to operate and how decisions are made;
- the rights and obligations of each shareholder; and
- the processes to follow in certain situations such as the company issuing shares and shareholders selling shares.
Why should I have a Shareholders Agreement?
- As these agreements are essentially a governance manual for the company and its shareholders, a considered, custom, and well drafted Shareholders Agreement is a useful tool to effectively and clearly communicate:
- who is entitled to appoint directors;
- whether it’s the directors or shareholders who make decisions regarding key matters;
- how shareholders can sell their shares;
- how the company can issue further shares; and
- what happens when certain events occur, such as a shareholder breaching their obligations under the Shareholders Agreement,
and more. If you are the sole shareholder, then a Shareholders Agreement may not be necessary. However, if you’re looking to introduce another shareholder (such as an investor), it is worthwhile considering whether you should enter into a Shareholders Agreement.
It’s important the document appropriately deals with your specific needs and while there are a number of factors to take into consideration, it starts by understanding what your intentions are and what you’re planning to do.
If you have any questions about Shareholders Agreements, please contact our business team for more information at 07 3224 0265
