When setting up a new business, often with family or friends, it is easy to assume that nothing will go wrong and you will all agree on future business decisions. After all, if you trust each other enough to go into business together, why is there a need for a formal legal shareholder agreements? It may seem that by asking for one, it shows a lack of trust in the other parties.
Hopefully nothing will go wrong in the future, but it is good business practice to put in place measures to protect the business if there is a break-down in the relationship or future disagreements. Without a Shareholder Agreement you may face not only the breakdown of a friendship but also a costly and acrimonious legal dispute.
Shareholder Agreements ensure that the running of the company and the responsibilities of the shareholders are properly thought through; there is clarity and certainty as to what can and cannot be done and decisions are taken by consensus and discussion.
Each company is different, and as part of the process we will carry out a full Fact Find to help identify other needs or areas of potential conflicts that may need addressing so that Shareholder Agreements is set up correctly.
The Agreement works in conjunction with the company’s articles of association yet gives you more protection than the articles alone and go into more detail regarding protective provisions for shareholders or define the limits of their responsibilities.
A Shareholder Agreement is important to fully determine the basis for important decision making; to restrict the power of directors where necessary and to provide protection for the parties involved in the ownership of the company.
A Shareholder Agreement prevents situations where changes in one shareholder’s circumstances can have an effect on the company; safeguarding each shareholder’s financial interest in the company, and the interests of the shareholder’s families in the event of the illness or death.
Having a Shareholder Agreement is an affordable way to minimise any potential business disputes between owners by making it clear how certain decisions are made and also by providing a framework and procedures for dispute resolution.