A Shareholders Agreement is a legally binding contract between the people or entities who own a company. It includes the shareholders and sometimes the company itself. A Shareholders Agreement is not a legal requirement for a Company. However it may be advisable that one is drafted in conjunction with the Constitution. This allows it to set out in greater detail how the company should be managed. Additionally it sets out the rights and responsibilities of the company and its shareholders. It also establishes processes to address any issues that might arise in the future.
Advantages of a Shareholders Agreement
Privacy: While a company’s Constitution is a public document, available for inspection by the public, a Shareholder’s Agreement is a private and confidential document between the parties.
Detail: Unlike the Constitution, the Shareholders Agreement can be used to give rights and impose obligations on and between shareholders.
Amendment: The Constitution can be amended by special resolution (a 75% majority of shareholders), whereas a Shareholders agreement requires a unanimous agreement of the parties in order to be varied, unless otherwise specified.
A Shareholders Agreement is a legally binding contract, so it is important that the contents are understood by all parties. We offer legal support and advice in relation to company formation and drafting shareholders agreements to ensure that your Company and shareholder interests are taken into account and protected. For any specific queries, reach out to us.