Anna Sivula, Solicitor in AMD’s Commercial team, discusses the benefits of shareholders’ agreements.
Shareholders’ agreements should be a key consideration for any private limited company with two or more shareholders.
In the absence of a shareholders’ agreement, a company’s internal affairs will be regulated by the Companies Act 2006 and the Articles of Association. For a lot of SME businesses, the Articles are taken from an incorporation agent or based on the ‘model’ articles which contain standard provisions. Standard Articles may be suitable for a one person company or a small business that is just starting up but they may not be appropriate for a growth business or one with a more complex share structure.
Articles of Association are a public document and can be accessed by anyone through the Companies House website. Conversely, a shareholders’ agreement is a private contract between the shareholders of a company which does not need to be filed at Companies House.
A shareholders’ agreement is therefore a flexible way of regulating a company’s affairs and allows for bespoke drafting, tailored to the specific objectives of the shareholders. Small companies with two equal shareholders who are also directors may only need a simple agreement but companies with several shareholders, some of whom may be investors who do not have control at board level, may need a more detailed agreement.
Some of the key considerations in a shareholders’ agreement include:
There is no legal requirement to have a shareholders’ agreement but companies with two or more shareholders should consider having one in place. In our experience, trying to resolve shareholder disputes without a shareholders’ agreement will always prove far more problematic. It stands to reason that there is less potential for conflict between shareholders when their roles and responsibilities are discussed and clearly recorded from the outset.
If you would like to discuss how a shareholders’ agreement can benefit your business, please do not hesitate to contact our experienced Commercial solicitors by telephone 0117 9733 989 or email email@example.com.
This article is provided for general information purposes only and represents our understanding of the relevant law and practice as at the date of uploading. This article should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.Back to Index