When it comes to drafting a Shareholder Agreement, there are several key components that must be considered and included within the provisions. Here, we take a closer look at some of these vital elements.
Shareholder Names
Shareholder Agreements are business contracts, to it is crucial to name all shareholders correctly. Their legal names, addresses, and telephone numbers must be identified within the document.
Shareholder Responsibilities
Shareholder Agreements are drawn up to avoid disagreements arising between shareholders so the business can continue to run smoothly. In the Agreement, you must identify procedures to establish the way in which officers are terminated and appointed along with rules regarding which actions shareholders or officers are able to take in the corporation’s name.
Shareholder Voting Rights
In cases of larger companies, Shareholder Agreements must establish all shareholders’ voting rights and the kind of vote required to make decisions.
Company Decisions
When companies grow, they often have to make key decisions in a number of areas such as paying back loans, acquiring new spaces or buying property. Shareholder Agreements offer protection against only a few corporation members making these decisions.
Determining The Procedures for Selling or Transferring Stock
Shareholder Agreements can contain provisions restricting certain sales or transfers.
Each Party’s Legal Obligations
Shareholder Agreements must outline each party’s legal obligations so shareholder disputes can be settled quickly and easily.
Shareholder Financial Responsibilities
A Shareholder Agreement should determine how much money all shareholders are investing in the company and the commitment level required from each one.
Distributing Dividends
The Shareholder Agreement should outline how dividends will be paid and how frequently.
Exit Strategy
All Shareholder Agreements should contain details about what should happen if the business is to be dissolved.
These are just some of the elements to bear in mind when drafting a Shareholder Agreement. It can be difficult to cover everything effectively without professional legal advice, and when Shareholder Agreements are not drawn up correctly, there is always a risk that disputes will arise and will prove difficult and costly to settle.
The best way of ensuring your Shareholder Agreement is properly drafted and customised to meet your company’s specific needs is to use the services of a solicitor.
We have an excellent team and you can contact us at Carter Bond Solicitors on 020 3476 6751 or by email info@carterbond.co.uk
Disclaimer: This note comprises the view of the author at the time of writing. This note is not a substitute for legal advice. Information may be incorrect or out of date and may not constitute a definitive or complete statement of the law or the legal market in any area. This note is not intended to constitute advice in any specific situation. You should take legal advice in specific situations. All implied warranties and conditions are excluded, to the maximum extent permitted by law.
