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Actec Shareholders Agreements For Closely-held Corporations ... Form

hello I am Jaspreet Potter a solicitor in the corporate commercial at IBB solicitors a shareholders agreement is a contract entered into between a company and some or all of its shareholders the purpose of such an agreement is to govern the relationship between the parties including personal rights and obligations of shareholders together with the articles of association of the company the two contracts create internal rules which the company is shareholders have to abide by the whole point of the shareholders agreement is to avoid disputes in the future and should they arise the agreement would determine how such a dispute is to be resolved it's prudent to put a shareholders agreement in place from the outset ie as soon as the company has been incorporated or has started to trade because it's easier for the parties to agree in focus on such matters at this stage when they have the time as opposed to when the business is up and running this is a much quicker and easier option than trying to negotiate a settlement when a dispute comes up typically a shareholders agreement would commonly address the following four important matters number one management directors of a company are responsible for day-to-day decision-making and management of the business and accordingly I entitled to exercise all powers of the company as necessary for it to function without shareholders consent is some companies where the director is also a shareholder this is not such an issue however where the shareholder is not a director then he or she would most certainly wish to be consulted on or reserve the right to be able to veto fundamental decisions for example selling material assets of the business and appointing new directors number 2 dividends each shareholder may have a different idea about when dividends will be paid by the company some shareholders may wish the company to retain the equity to enable it to grow whereas others may have envisaged a swift return the agreement would stipulate as and when dividends can be declared for example after a period of 3 years and/or after all loans have been repaid number 3 voluntary transfer of shares should any shareholder decide to sell his or her shares naturally the other shareholders would want to be consulted as they wouldn't want a competitor or a third party who has a differing view on how the business should be run to purchase the shares the shareholders agreement would oblige the selling shareholder to obtain the consent of the other shareholders and perhaps offer the shares to the existing shareholders first before selling them to a third party and for compulsory transfer of shares should a director who is also shareholder wish to leave the company the remaining shareholders may not wish them to retain their shares in order to circumvent this a compulsory share transfer provision can be incorporated into the agreement so that a departing director who is also a shareholder would be obliged to sell his or her shares to the remaining shareholders or company they are no hard and fast rules about what the agreement should or should not include the agreement can cover any matter that the shareholders wish to address our common provisions include deadlock drag along and tag along on the sale of the company and non-compete restrictions on shareholders over all a shareholders agreement is vital for the internal running of the company as it resolves any ambiguity over present and future management it also has a deterrent effect as having a shareholders agreement in place from the outset not only resolved spews but it has any hostile shareholder from creating any frivolous claim if you would like further information on this then please contact me Jaspreet pattar or one of my colleagues in the corporate commercial team at IBB solicitors