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Shareholder Agreements
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A shareholders’ agreement is an agreement between the shareholders of a company which governs the business relationship between the company and each of its shareholders. It is used to ensure that the company only operates and trades in the manner originally envisaged by the shareholders. It can also be used to put restrictions on the way shareholders can dispose of and otherwise deal with their shares.

Many of the restrictions on the operation of the company and dealings in shares are also appropriate to put into the company’s articles of association.

The distinction between the two documents is subtle but important. A company has no power to act outside the provisions of its articles of association, which means that anything it tries to do which is forbidden by the articles is of no legal effect; for it is common for the articles to prevent certain dealings in shares, and any transfer of the shares in contravention of the articles will be ineffective. This gives shareholders a great deal of protection. However, it does not generally give the shareholders any right to compensation for such acts. A shareholders agreement does not affect the legal validity of the company’s or shareholders’ acts, but because it is a contract, it gives the shareholders the right to seek compensation for any loss they suffer as a result of its breach.

Common matters covered by a shareholders’ agreement include:

  • Restrictions on the nature of the business of the company
  • The entitlement for the shareholders to either be directors of the company or to appoint and remove a nominated director
  • Matters which require the consent of all or a specified percentage of the shareholders, for example the recruitment of new staff, sales and acquisitions of assets beyond a certain value, borrowing money, opening new bank accounts
  • Apportionment of the liability between the shareholders for any personal guarantees they have been required to give
  • Restrictions on the issue of new shares
  • Restrictions on the transfer of existing shares
  • Options for the shareholders to acquire each other’s shares in certain circumstances
  • Provisions for what is to happen on the retirement, death or incapacity of a shareholder
  • Provisions as to how shareholders will vote on resolutions
  • Provisions to prevent shareholders from competing with the business of the company
  • The policy for the payment of dividends

Healys Solicitors has extensive experience and expertise in advising on and drafting shareholders’ agreements. We take a realistic and commercial approach to a client’s needs, always ensuring that we understand the commercial imperatives of the company and its shareholders, in order to best tailor the shareholders’ agreement to the circumstances.

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Call our London office on 020 7822 4000 or our Brighton office on 01273 685 888. You can also contact us online.
Call Us Today
London: 020 7822 4000 Brighton: 01273 685 888 Or you can contact us online: Contact Us