Businesses often begin life as a limited company. In the early stages of a business, focus tends to be on developing the business and shareholders often don't plan properly for the future. Shareholders can benefit greatly from putting a shareholders' agreement in place, as a mechanism for dealing with future changes of circumstance.

Shareholders’ agreements aid in managing and minimising the risk of internal conflict between management, by defining and outlining the responsibilities of the parties involved through a formal written contract.

What is a shareholders’ agreement?

A shareholders’ agreement is an agreement between all the shareholders of a company.

It is an essential and integral document to any shareholder relationship, which allows shareholders to regulate their relationship with each other, the company and its directors. It provides clarity and direction for all by setting out the framework as to how the company is to be governed and operated. A shareholders’ agreement also helps to mitigate against costly and potentially damaging shareholder disputes, should they arise in the future.

When do I need a shareholders’ agreement?

The circumstances in which you may need to consider a shareholders’ agreement with your fellow shareholders are:

• If your business has two or more shareholders
• If you are setting up a new company or starting a new business with others
• If you are buying a business with others in a new company
• If you are acquiring shares in an existing trading company (whether new shares or from another shareholder)
• If you are selling shares or transferring shares to others in your company, whilst retaining a shareholding

Shareholders’ agreements are flexible and can cover a multitude of matters relevant to your particular circumstances. No two companies are the same and it is important, if the agreement is to be of value, to have an agreement which is tailored to meet the particular concerns and structure of your business.

Our commercial solicitors have wide ranging experience in advising on shareholder agreements for start-ups, joint ventures, where new investors come on board and in many different sectors and sizes of business. This experience not only offers reassurance, but saves time and money.

If you feel that any of the points raised are applicable to your situation, and would like further advice on how a shareholders’ agreement could benefit you, then please do not hesitate to contact the team on 01206 217 326.