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Why a shareholders’ agreement is necessary

Shareholder Agreement

September 19, 2019

A shareholders’ agreement is a way for those who have a stake in a business to agree terms between them to control how a company is to be run.

The agreements might cover:

  • How shares can be issued and transferred
  • How decisions are to be made
  • And how profits should be divided

Why a shareholders’ agreement is necessary.

Where there is no shareholder’s agreement in place, shareholders are typically treated equally, and dealings in shares are governed by legal rules which may not necessarily take into account the aims of the founders of the business.

An agreement is useful in a wide range of circumstances, for example if the founders would like to avoid having a stranger buy into the business, or if an investor who made a more significant contribution, or has particular expertise is to be afforded additional control.

A shareholder agreement can give you greater flexibility over the way your company is run.

If you are bringing a valuable asset into the business, for example a crucial piece of software, or a reputable brand, then it is important to use a written agreement so your intellectual property and investment is not left to waste if things do not go as expected

As experienced commercial solicitors, we are able to advise and assist in relation to the drafting of shareholder’s agreements.