A Shareholder’s Agreement is a document detailing an agreement of terms amongst the shareholders of a company. There are often occasions when the constitutional documents of the company do not lay out in great enough detail the relationship between the shareholders and the company. Therefore it is common practice for a shareholder agreement to go in to greater detail in laying out the relationship between the shareholders, which will then affect their relationship with the company. Hewetts have a great deal of experience preparing and drafting Shareholder Agreements for companies of all sizes, as well as advising on already-existing Agreements. We are based in Reading but operate a national service.
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In a limited company, each share carries a prescribed number of votes. In most cases all the shares are of the same class and each carries one vote. That means whoever has the majority controls the company. Therefore if the shareholders are not happy with such an arrangement they can use a shareholders agreement to provide a more equal distribution of power, as well as protecting the minority from exploitation. The most usual situations where these circumstances arise are where:
- A small number of people all work together want an arrangement whereby all decisions are to be taken unanimously;
- One shareholder has lent money to the company, but has no personal involvement in its management;
- Some shareholders are not directors. Therefore they are not in any position to control the company's affairs outside of a general meeting.
- Shareholders have formed a company with a specific joint venture in mind and when the venture is completed the company will be wound up;
There are quite a few advantages to supplementing the constitutional documents of the company with a shareholders agreement:
Most shareholder agreements therefore deal with the following general issues:
More specific issues may include:
1. Controlling and regulating the ownership and voting rights of the shares in the company, through:
2. Control and management of the company:
At Hewetts we can help draft a Shareholder Agreement that is specific to your needs.