What is a Shareholder Agreement?
Quite simply, a Shareholders' Agreement is a contract drawn up between the shareholders and the company.
The main purpose of a Shareholders' Agreement is to govern the relationship of the shareholders and specifically, so that the shareholders have a contract to refer to for the running of the business. Typically, a Shareholders' Agreement will be most prevalent should a shareholder dispute arise.
Many new start up businesses incorporate their company and decide to place the drafting of a Shareholders' Agreement on hold. Indeed, there is nothing at all in law which states a Shareholders' Agreement is required but any company solicitor will advise you that a properly drafted Shareholders' Agreement can not only assist with the smooth running of the company but it can also assist in saving on future legal fees should a dispute arise. It is much easier to refer back to the original SHA than trying to prove what was said between the shareholders without any actual evidential proof.
Generally, a Shareholders' Agreement will set out matters such as the way the shares are allocated, what remuneration the shareholders will receive, what power the directors have in respect of replacing or appointing new directors, transfer or sale of shares, sale of the company, how new shareholders are appointed etc. There is no real checklist as to what should be contained in the Shareholders' Agreement but it is advisable that anything agreed between the shareholders' is documented in the Shareholders' Agreement.
Is there a standard Shareholder Agreement template I can download from the internet?
It is never advisable to obtain a precedent template from the internet. When you consider that the success of the company may fall upon the Shareholders' Agreement, it is always advisable to obtain professional advice and assistance from a qualified company solicitor who will obtain an understanding of the company and also properly document the shareholders' agreement for you.
How much will this cost?
The cost will very much depend on the complexity of what the shareholder's have agreed. Typically, a straight forward Shareholders' Agreement will cost in the region of £300-£400 plus VAT with more complex Shareholders' Agreement attracting a higher fee.
What if there is a dispute between the Shareholders?
If the Shareholders' Agreement has been properly drafted, disputes should not arise often because the structure and regulation will be set out in the Shareholders' Agreement. Therefore, prior to a dispute arising, shareholder's will refer to the Shareholders' Agreement. Disputes are much more likely to arise if there is not a properly drafted Shareholders' Agreement in place.
What if is Shareholders dies?
Generally, the Companies Articles of Association will have a pre-emptive right of purchase by the other shareholders should this unfortunate event occur.
Where should the Shareholder Agreement be stored?
A copy can be kept with each shareholder. The original document can be kept securely with your solicitor or at the Registered Office. The Shareholders' Agreement is a private document and is not open to public inspection BUT it may have to be disclosed for tax purposes.
Clients of Selachii can use our office as their Registered Office Address for Companies House and Government Mail such as tax / HMRC.
Richard Howlett is a solicitor at Selachii London - 02077925649
Richard Howlett – Partner
