- Business Taxes
- Business Terms and Conditions
- Company Registration
- Discretionary Trusts
- Shareholders Agreement
5 things you need to know about Shareholders Agreements
- A shareholders agreement is one of a company’s most important documents. It sets out the agreement between the shareholders as to how the company will be run, and governs the relationship between the individual shareholders. A well drafted shareholders agreement protects majority shareholders, minority shareholders and the company.
- A shareholders agreement sets out how decisions will be made, and who makes what decisions. For example, the key employees may set a business plan and budget that is then approved by the directors. A well drafted shareholders agreement prevents disputes, enables the smooth functioning of your company, and provides a point of reference for both shareholders and potential investors.
- The shareholders agreement should set out who can appoint directors, for example shareholders who hold 25% or more of shares, or a vote of shareholders owning 50% or more of the shares. The shareholders agreement should set out what decisions can be made by directors, and which decisions must be made by the shareholders.
- A well-drafted shareholders agreement has “tag-along” and “drag-along” clauses to address what happens if a bidder wants to buy the whole company, or the majority shareholder’s shares, and the rights of the other shareholders should this occur.
- The shareholders agreement should address when new shares are issued, and how shares can be sold. You may also incentivise key employees by issuing them with shares over time. This is called vesting. Finally, make sure that you think about your exit strategy when drafting your shareholders agreement.
If you need more information about Shareholders Agreements, speak to one of LegalVision’s specialist lawyers. We are small business specialists! Give us a call on 1300 544 755 or fill out the form on this page. You can also download a free Shareholders Agreement from our site.
Commercial Law, Contract Law, Information Technology And Online Law, Intellectual Property, Capital Raising LawExperience:
Bank of America Merrill Lynch, Baker & McKenzie, Hogben Group