A shareholder agreement is probably the last thing on your mind when you set up a company with your friends or members of your family. You may not take it into consideration because you can’t foresee anything going wrong and fear it could taint personal or professional relationships. However, setting up a shareholder agreement is a standard business practise and certainly something that would protect you in later times when you come to sell or take investment for the business.
Most of the time, a shareholders agreement will never need to be used, but much like insurance, it’s something you will be glad you arranged if the time comes.
What Is Covered As Part Of A Shareholder Agreement?
A Shareholder Agreement will, as a minimum, cover:
- Who can be a shareholder and who can serve on the board of directors
- What happens if a shareholder resigns, retires or is fired
- What happens if a shareholder dies or becomes impaired
- What is the value of the shares
- Who will purchase the shares of a shareholder who leaves
- How much will be paid for the purchase of a shareholders shares
- Can you cause a shareholder to leave if he or she is no longer beneficial to the business or you are in dispute
When required for any reason, you can ask your Companies and Associations Lawyer to write other clauses into the Shareholder Agreement.
How Will A Shareholder Agreement Protect Me?
A shareholders agreement will protect you in many ways.
As a minority shareholder, your voice will count for less when it comes to decisions around issuing new shares, investment and selling the business. With a properly drawn up shareholder agreement, certain clauses can be written to ensure you have the control you desire to effective run the business you are a part of.
As a majority shareholder, your voice will always count for more. However if, for example, you want to sell the business and a minority shareholder is unwilling – a shareholder agreement could force the minority shareholder to sell their shares for a certain value that you feel is fair. An agreement could also prevent a minority shareholder from transferring their shares to a third party – something which would prove problematic if the transfer is to a competitor or someone you would rather not involve in the business.
A shareholders agreement will be able to resolve any dispute which is affecting the shareholders or the business.
When Should We Put A Shareholder Agreement In Place
A shareholder agreement should ideally be put in place when the company is formed, this will ensure from the very beginning that everything is always carried out in accordance with a laid out set of rules. It’s never too late to setup an agreement however and if you do not have one in place you should certainly look to set one up as soon as possible.
When you’re looking to setup a new business and need a shareholder agreement drawn up, speak to the professional and helpful Companies and Associations Lawyers at Antunes Sydney today on 02 9964 0499.