A Shareholders Agreement is a contract entered into by the shareholders of a company. It regulates the relationship between the shareholders and governs the management of the company. It can outline shareholders’ rights and obligations, providing protection for each shareholder, whether they be a minority or majority Shareholder.
Although a Shareholders Agreement is not a legal obligation of a company, its value should not be underestimated. It is often omitted with the view of saving time and money, however the lack of certainty created by not having a Shareholders Agreement in place can often lead to disputes amongst the shareholders, which can be costly to deal with. When shareholders disagree, the effect on the business/company can often be detrimental and time consuming.
Can a shareholder agreement be amended?
Yes, a shareholder agreement can typically be amended, but the process for making changes should be outlined in the agreement, often requiring the consent of a specific majority or unanimous consent of the shareholders.
Is a shareholder agreement enforceable in court?
Yes, a properly drafted and executed shareholder agreement is legally enforceable in court. It can be used to resolve disputes and ensure that shareholders adhere to the agreed-upon terms.
Can I draft my own shareholders’ agreement?
Yes, you can draft your own shareholder agreement without the direct involvement of a solicitor. However, it is important to recognise that shareholder agreements are legally significant documents that can have a substantial impact on your company's governance and the relationships among shareholders.
A solicitor would work with you to customise your agreement to suit your business, ensuring all potential scenarios your business may encounter are taken into consideration.
What happens if there is a breach of the shareholders agreement?
When a shareholder agreement is breached, it can lead to various legal and practical consequences and remedies, depending on the specific terms of the agreement and the severity of the breach. Some common outcomes that may occur when a shareholder agreement is violated includes legal remedies, enforcement of buy-sell provisions, dispute resolution procedures, forfeiture of shares, monetary damages, injunctions or termination of agreement.
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