Shareholders agreement for existing company; working directors

Published: 14th February 2012
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Shareholder agreement is not a public document like an article of association but it can contain the same provisions as the article of association. Shareholder agreement can be used by new or existing company because it deals with important issues. Such as:
• dividends payment;
• limitations on the transfer of existing shares;
• options to acquire each other’s shares in certain circumstances;
• what is to happen on the retirement, death or incapacity of a shareholder;
• voting procedure;
• non competing with the business of the company.
Shareholder agreement regulates the relationship between shareholders of the company. It is an important document because it minimises the monopoly of the majority of the shareholder and provides protection to the minority of the shareholders. Shareholder Agreement is not the requirement of the law and it is not mandatory for the companies to have a shareholder agreement in place. But due to its flexibility most of the companies prefer such agreement. Shareholder agreement confirms the rights and liabilities of the shareholders and also provides the sense of the security to the minority of the shareholders. Shareholder agreement develop the mutual understanding between the shareholders and provides the procedure for the decision making .shareholder agreement is a back bone of the private limited company because it provides the opportunity to settle the issue and adopt the procedure for smooth running of the company by not invoking the provision of the companies law. Shareholder agreement takes place where the companies’ law is silent shareholder agreement protects the business ideas and structure of the administration of the company. No one can inspect such a document under the law and it can be placed and registered at the companies House.
The constitutional document of the company often does not describe in great detail the relationship amongst the shareholders. Therefore it is very useful document to describe in great details the relationship of the shareholders with each other. The limited companies adopt the shareholder agreement with the constitutional documents for the following purposes:
• It is a private document and confidential remains within the company;
• It allows great flexibility and also protect the minority of shareholders;
• It avoids the disputes amongst the shareholders and ensures the smooth running of the affairs of the company.
The companies usually prefer the shareholder agreement where there is more than one member. Shareholder agreement is valid and recognised by law .The value of the shareholder agreement is that it constitutes overall business strategy and minimises the disputes between the shareholders; because in absence of such agreement, the disputes will e resolved in accordance with the provisions of the articles of association. The articles of the association can be amended or altered by 75 % of the majority while the shareholder agreement can be amended by the agreement of the all shareholders. The shareholder agreement does not need to be registered at the Companies House.
Mostly the Companies have shareholder agreements where there is more than one member. A shareholder agreement is legal contract which made between shareholders of the company. Shareholder agreement protects the interests of the shareholders of the company as against each other whether minority, majority or equal shareholders.

Every private company generally have a formal shareholder contract that describes the individual responsibilities, rights and obligations. Shareholder agreement is a document that covers the issues like appointment of director, transfer of share, dispute resolution, intellectual property, exit strategy, transfer of share on death or incapacity etc. The importance of the shareholder agreement is that it will minimise the issues between shareholders and includes the overall business strategy. Because it provides that what can be done and what cannot be done.
Net Lawman provides the following shareholder agreement. Such as
Shareholders agreement: new company with shareholder directors
A comprehensive shareholders agreement for a new company. Use this agreement to protect the rights of each shareholder against each other and also for setting down the strategic management of the company. This agreement could be put in place at the time of incorporation or shortly afterwards in order to set out the balance of shareholder power as the company grows. It is suitable for companies where all or some shareholders are also directors, or where there is a mix of active and inactive owners.
Shareholders agreement: new company with shareholder directors and a major lender
A comprehensive shareholders agreement for a new company that has also been financed with debt from a big lender as well as equity. Use this agreement to protect the rights of each shareholder against each other and the debt provider and also for setting down the strategic management of the company. This agreement could be put in place at the time of incorporation or shortly afterwards in order to set out the balance of shareholder power as the company grows. It is suitable for companies where all or some shareholders are also directors, or where there is a mix of active and inactive owners.
Shareholders agreement: existing company with shareholder directors and debt financing
A comprehensive shareholders agreement for an existing company. Use this agreement to protect the rights of each shareholder against each other and also for setting down the strategic management of the company. This agreement could be put in place perhaps on the introduction of new shareholders or directors, a new financing round, or after restructuring, or simply to redress the balance of shareholder power as the company grows. It is suitable for companies where all or some shareholders are also directors, or where there is a mix of active and inactive owners.

Shareholders agreement: existing company with shareholder directors and a major lender
A comprehensive shareholders agreement for an existing company that also has debt financing from a big lender such as a business angel or venture capitalist. Use this agreement to protect the rights of each shareholder against each other and the debt provider and also for setting down the strategic management of the company. This agreement could be put in place perhaps on the introduction of new shareholders or directors, a new financing round, or after restructuring, or simply to redress the balance of shareholder power as the company grows. It is suitable for companies where all or some shareholders are also directors, or where there is a mix of active and inactive owners.


Miriam Taylor working for Net Lawman UK for providing best quality legal documents, agreements and free legal information for: http://www.netlawman.co.uk/bizdoc/shareholders-agreement.php?docid=CP101 | http://www.netlawman.co.uk/bizdoclist/shareholders-agreement.php

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