What is a shareholders’ agreement?

A shareholders’ agreement is a contract between the shareholders of a company, which provides a framework for how the company is set up and administered and how disputes between shareholders will be resolved.

There should also be a shareholder’s agreement where two or more shareholders have entered a joint venture. A shareholder’s agreement is not the same as a company constitution.

Shareholders Agreement

In some cases, the company’s constitution will be sufficient and it is not necessary to have a shareholders’ agreement, however, a shareholder’s agreement is preferable for two main reasons:

  1. Clients like to keep sensitive arrangements between shareholders confidential but the constitution is a public document.
  2. A constitution can be changed by a special resolution of the shareholders, which is generally 75% of the shareholders entitled to vote, whereas a shareholders’ agreement will generally provide that changes can only be made with 100% shareholder approval.

What is included in a shareholders’ agreement?

  • directors and the conduct of the company affairs; –
  • the transfer of shares in the company
  • the valuation of shares if one shareholder wishes to sell and
  • the process for introducing new shareholders
  • specific matters requiring unanimous shareholder approval

Having a shareholder’s agreement protects all parties from a long legal battle.

If you need to have a shareholder’s agreement drawn up please give us a call 09 267 2700 or contact us.