Drafting a Shareholders Agreement: Why are general meetings so important?

Do you have a company? Have you prepared a shareholders agreement? Does your shareholders agreement cover general meetings? Have you even spoken to business lawyer about the prospect of getting a shareholders agreement drafted?

The shareholders agreement, amongst many other important things, sets out the rights, responsibilities, and obligations of the shareholders of your company. One of the responsibilities of a shareholder is to attend general meetings. General meetings are typically between the shareholders of the company. They are very important, as they provide an opportunity for shareholders of a company to come together and make collective decisions on important matters regarding the company.

What decisions can be made at a general meeting?

Decisions that can be made at a general meeting include:

• Whether the company should issue new shares, and if so, how many shares and what type of shares are to be issued;
• Whether the company should enter into a loan agreement or debt over a certain amount;
• Whether the company should be sold to another individual or entity;
• Whether a shareholder of a company can obtain a loan from the company;
• Whether a certain director should be removed as director;
• Whether the company should make a claim or commence legal proceedings for a particular matter;
• Whether to change the dividend policy of the company; and
• Whether the company should create an employee share plan.

These are only some standard decisions that can be made at a general meeting. When you are drafting your Shareholders’ Agreement, your business lawyer can surely add to, or take away from, this list. It is entirely up to you, as the shareholders agreement governs how you, as a shareholder, wish for the company to operate.

Conclusion

A shareholders agreement is one of the most important legal documents for your company. If you are not the sole owner of the shares in your company, it is recommended that you have a shareholders agreement drafted. If your Shareholders Agreement is very detailed in outlining how general meetings will be arranged and what decisions will be made at such meetings, it can help your company to operate more smoothly and with less conflict.