DO YOU NEED A SHAREHOLDERS' AGREEMENT?
A shareholders’ agreement is a confidential contract setting out how a company will be governed and how decisions can be made.
An agreement typically includes such matters as:
1. APPOINTMENT & PROCEEDINGS OF DIRECTORS:
Membership of the Board. How directors are to be appointed and for what term. The quorum for Board meetings and how resolutions will be passed.
2. COMPANY FUNDING:
Capital contributions and whether debt or equity, any external borrowing required and security to be provided.
3. MANAGEMENT:
Power of the Chairperson and appointments of executive management.
4. MATTERS REQUIRING APPROVAL:
Those transactions that require unanimous consent of the Board, e.g. sale and purchase of assets, company borrowing, granting security over the company property, business and strategic plans, distributions.
5. TRANSFER OF SHARES:
Whether share transfers will be subject to pre-emptive rights. How shares will be valued.
6. RESTRAINTS & CONFIDENTIALITY:
Non-competition provisions, restraints and undertakings, disclosure of confidential information.
7. TERMINATION:
Those events that will bring the agreement to an end. What happens to the business or shares in the company owning the business on termination; and
8. DISPUTE RESOLUTION:
The processes shareholders will follow if they have a dispute. Whether there is a preferred method of resolution (e.g. mediation, arbitration) and if there is an internal procedure.
As a shareholders’ agreement does not need to be publicly registered (unlike a company constitution), it is often a more suitable forum for dealing with intricate details of a company’s affairs.
If you would like to discuss a new shareholders’ agreement for your company or a review of your existing shareholders’ agreement, please contact our experienced commercial team for a meeting.