A Shareholders’ Agreement is an agreement usually entered into by all the shareholders in a company. In some instances however, a Shareholders’ Agreement can also be between just some shareholders of the company.
A shareholder is a person who owns shares in a company and therefore can be said to own a portion of the company. The influence of a shareholder in the decision-making process of the company will usually depend on the quantum of shares held in the company.
A Shareholders’ Agreement is necessary to regulate the relationship between the different owners of the company and helps to avoid or minimise friction on important issues as the management of the company, ownership of the shares and the protection of the shareholders. It will usually provide for the dividend policy of the company, voting rights and requirements for the transfer of shares.
Aside the above, a Shareholders’ Agreement can also provide for what happens if ‘things go wrong’ with the company. Having such agreement in place can therefore help to avoid disputes about who is entitled to what or who is empowered to take certain decisions and actions in the event of liquidation or other challenges that the company may face.
If you have started a company or intend starting one with your friends, family or some other partners, it is important you consider having a Shareholders’ Agreement. You can send us a mail (to firstname.lastname@example.org) for further guidance on this.
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