Shareholders Agreements

Business & Commercial

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A shareholders agreement is an agreement between the directors and shareholders of a company. Usually, the agreement covers fundamental parts of the company’s activities such as what the duties of the directors are and how new shares will be issued. Because the activities of every company varies depending on a range of different factors, it is important that your agreement reflects your company’s circumstances. It is important to note that a shareholders agreement works alongside a company’s constitution and legislative rules imposed on the company.

The team at Burgess Thomson have experience is advising on and drafting shareholders agreements for many companies within different industries. We recommend having an agreement in place to reduce the risk of disputes or confusion between the parties.

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FAQ's

What is covered by a shareholders agreement?

A shareholders agreement can cover a number of different things, but will largely depend on the type of company you are involved with. Some general examples of common inclusions in an agreement are voting rights, shareholder rights and obligations, and how the company is managed and operated.

What is the difference between a investment agreement and a shareholders agreement?

An investment agreement is an agreement between an investor and a company, whereas a shareholders agreement is between the directors and shareholders of a company. Investment agreements usually cover the conditions of an investment. The relationship between the two is that depending on the type of investment, they may become a shareholder as a result and therefore, will be affected by the shareholders agreement.

What is a first right of refusal clause?

A first right of refusal clause is an important clause included in many shareholders agreements. The effect of this clause is that if one shareholder decides they want to sell their shares, they are offered firstly to existing shareholders who are given the right to buy or refuse to buy them. This is advantageous in some company arrangements as it ensures that the same shareholders involved in the company continue to be involved in it. For example, if there are only two shareholders in a company and one decides they want to sell their shares, the company may have a totally different complexity if the buyer of those shares is unfamiliar with the company.

Will the agreement cover shareholder resolutions?

It is quite likely that a shareholders agreement will cover shareholder resolutions. Usually, the agreement will specify who has the power to make decisions on certain matters. When shareholders make decisions on behalf of the company this is referred to as a shareholder resolution. You should also be familiar with the types of shareholder resolutions and the appropriate use of each. These can be classified as an ordinary resolution, special resolution or a unanimous resolution.

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