What is a shareholders’ agreement?

0

Good afternoon! I hope you can help me with this query. I’m in the process of registering a new private limited company online using a company formation agent, and am stumbling at the shareholders’ agreement. What exactly is it? I am just trying to decide whether or not it is worth pursuing, and whether it is actually a requirement because I will be the only shareholder and director in the company to begin with, but I am hoping to find a business partner at some point in the future as my company grows.

Answers

0

A shareholders’ agreement is not a legal requirement but it is recommended for companies with more than one shareholder. It defines and protects the rights of shareholders, clarifies their responsibilities to the company and outlines the way in which decisions are made. As a sole shareholder, there is no need to have an agreement but you should put one in place if you decide to bring in more shareholders in the future.

A typical shareholders’ agreement will include provisions about:

  • Key decisions that require a majority vote from shareholders.
  • Decisions that require the agreement of all shareholders
  • The appointment and removal of directors.
  • Director’s powers and remuneration
  • The issue or transfer of shares.
  • Dispute resolution procedure
  • Dividend distribution policy
  • Entering into substantial contracts
  • Funding and borrowing

A shareholders’ agreement works in conjunction with a company's articles of association by enhancing the protection available to shareholders in specific scenarios. Without a shareholders’ agreement, disputes could easily arise and the voting power of majority shareholders could be detrimental to those who hold a minority of the votes.

a year ago
 

Your answer