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Shareholder Agreements

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.

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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.

Here are the key components often included in a Shareholders' Agreement:

Shareholder Rights and Responsibilities: The agreement defines the rights and responsibilities of each shareholder, such as voting rights, the right to receive dividends, and participation in major business decisions.

Share Transfer Restrictions: Shareholders' agreements often contain provisions that restrict or regulate the transfer of shares to third parties. These restrictions help maintain control over the composition of the shareholder base.

Buy-Sell Agreements: These provisions detail the procedures for selling or transferring shares between shareholders or to third parties. They typically outline the valuation method for shares and the conditions under which a shareholder can sell.

Management and Decision-Making: The agreement can specify the process for electing and removing directors and officers, as well as the decision-making mechanisms for important company matters.

Dividends and Distributions: Shareholders' agreements may address how and when dividends and distributions are to be paid to shareholders.

Dispute Resolution: These provisions outline procedures for resolving disputes among shareholders, such as mediation, arbitration, or litigation.

Confidentiality and Non-Compete Clauses: The agreement may include clauses to protect sensitive company information and prevent shareholders from engaging in competing activities.

Exit Strategies: Shareholders' agreements often address exit strategies, including conditions for selling the company, going public, or winding down the business.

Amendment Procedures: Procedures for amending the shareholders' agreement are typically included, often requiring a specific majority vote or unanimous consent.

How our solicitors can help

Our solicitors can provide valuable assistance in drafting a shareholder agreement by ensuring that the document is legally sound, comprehensive, and tailored to the specific needs and objectives of the shareholders and the company.

We will work proactively to progress your agreement without unnecessary delay and will stay in close touch to update you on the steps that are being taken. You will find us easy to contact if you have any questions or you need support from us at any time.

Call our commercial solicitors in Dungannon and Belfast on 028 87722102. We will talk through your situation with you and discuss what the first steps are in drafting a shareholder agreement. We can also answer any questions you may have.

Alternatively, you can fill in our online Contact Form and we will ring you.

FAQs

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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Our Commercial Contracts & Agreements Solicitors

Kieran QuinnKieran QuinnDirector
Emma McCaulEmma McCaulSolicitor
Ellen BatesEllen BatesTrainee Solicitor
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