Shareholders Agreements that support your business goals
When setting up a company, people are often more focused on their goals and hopes for the future and spend less time considering what could go wrong. Even when going into business with family and close friends, there is always the potential for disagreement in the future. Business owners who have put a well-written shareholders agreement in place will be better protected when things go wrong than those who have not.
Shareholders agreements are crucial to protect the shareholders investments and to establish a series of rules that govern the relationship between shareholders and set out how the business will be run. The corporate team at Fraser Dawbarns have extensive experience in drafting shareholders agreements and can help you to put an arrangement in place that will protect your investment. Contact Fraser Dawbarns today to see how we can help you.
Our commercial team are also rated as a ‘Leading Firm’ in the 2020 Legal 500 for our corporate and commercial work.
What are Shareholders Agreements?
A shareholders agreement can cover a variety of different areas governing the relationship between the shareholders and their relationship with the company. In general, shareholders agreements tend to:
- Define the rights and obligations of the shareholders
- Set out how the company will be run and how important decisions will be made
- Regulate how and when shares in the company can be sold
- Give some protection to minority shareholders
It is always useful to seek legal advice on the best way to achieve your particular goals and the corporate law team at Fraser Dawbarns will help you to create an agreement that protects you and your business. Contact us to find out more.
Why Are Shareholders Agreements Important?
Unlike articles of association, a shareholders agreement is not a legal requirement, but they are extremely important for business owners who are looking to protect themselves and their company. Some of the many ways that shareholders agreements can prove invaluable to shareholders include:
Protecting Minority Shareholders
Because not every business has an exactly even split in ownership, there are circumstances where minority shareholders may find themselves with very little say in how the company in managed. A shareholders agreement can include clauses that require all shareholders to give approval for any important decisions such as issuing new shares, appointing or removing directors or whether to take on loans or other borrowing.
Setting out the relationship between Managers, Directors and Shareholders
Shareholders are not necessarily involved in the management of a company, directors are the ones involved in the day to day running of the business. Directors are often also shareholders but this does not have to be the case. Where shareholders are not actively managing a company, they will likely want the capacity to hold the directors accountable and ensure that their approval is sought before any key decisions.
Regulating How Dividends Will Be Paid
Do you want to reinvest your company’s profit and grow your business or would you prefer to pay out dividends to the shareholders? Not all shareholders may agree and because control of the company is not always in the hands of the shareholders, it is often sensible for the shareholders agreement to specify under which circumstances dividends will be paid and when profits are invested into the company. Agreeing on this in advance can help to prevent conflict in the future.
Protecting Trade Secrets
Having a confidentiality clause is a vital way for you to protect your trade secrets and to ensure that anyone who is privy to this information will not be able to pass it on to a competitor. It is vitally important that your confidentially clause is drafted in a way that doesn't allow any loopholes and this can be tricky to get right. The best way of achieving an air-tight confidentiality clause that protects your business is through consultation with a quality corporate law solicitor.
Stating What Happens When Shareholders Leave or Die
A shareholders agreement should regulate what will happen in the event of a disagreement that causes one or more shareholder to leave the company. When conflict is already in existence, negotiating the terms of a departure can lead to further problems and failure to agree on terms. By codifying this before problems arise, it is possible to manage a departure so that the business is able to continue. Likewise on the death of a shareholder, it is vital to have procedures that are followed to ensure that business can continue with minimal disruption.
Contact the Corporate Law team at Fraser Dawbarns today for advice on all aspects of creating a shareholders agreement that will best serve the interests of the shareholders and the business.
Shareholders Agreements and Articles of Association
Articles of Association are generally known as articles. They are an important foundational document of a company and it sets out the management and administrative structure of the company. Articles regulate the internal affairs of the company including, board and shareholder meetings, powers and duties of directors, dividends, borrowing powers and so on. Articles establish a contract, laying out the relationship between the company and its shareholders or members.
The articles are a public document and are open to inspection at Companies House. Companies have freedom in drafting their articles although they are subject to relevant provisions of the Companies Acts.
The Corporate Law team at Fraser Dawbarns will be happy to assist you at every stage in the creation of Articles of Association and Shareholders Agreements.
Disputes between Shareholders
Unfortunately, disputes between people will always arise. Disputes between shareholders could be related to cash flow or arise from a clash of personalities amongst the management or may relate to different opinions about the strategic direction of the company.
If a dispute arises, your best course of action is to seek out a team of legal advisers who will consider the business issues and the people involved in the dispute, before working out the best way of coming to a workable solution.
The best way to minimise the impact of disputes between shareholders is by drawing up Shareholders Agreements and Articles of Association before any dispute arises. Working with the corporate law team at Fraser Dawbarns can pay dividends into the future as we help you lay out a structure and systems that can see your business through the generations.
I could not recommend Fraser Dawbarns more highly. They helped me through the whole process of being an Executor. The customer service is absolutely excellent.Client - Downham Market Office
Why Choose Fraser Dawbarns for your Business?
Direct Access to your Solicitor
Our corporate solicitors develop a good understanding of our client’s businesses and form close working relationships with our business clients, creating shareholders agreements that are precisely tailored to your needs. Clients who wish to arrange an appointment with our corporate law solicitors can do so easily, visiting us at any of our offices across East Cambridgeshire and West Norfolk. We can also visit you at your business if you prefer.
At Fraser Dawbarns we recognise that there is no ‘one size fits all’. With our flexible pricing options, we give our clients the choice of different pricing options. You can choose whether you would like us to undertake your work on a fixed fee basis or at an hourly rate, selecting the pricing option that best suits your needs.
No Hidden Charges
Clients opting for our fixed fee service, will know how much they will pay for the matter before we start work. Clients who prefer to be billed at an hourly rate will also be given a realistic range of costs before we begin. Transparency and trustworthiness are important to us and we will never surprise you with hidden charges that were not explained to you at the outset.
Contact Us Today
Our team will help you from the beginning of your case to the end, giving you total peace of mind. If you would like friendly, client focused advice on a wide range of legal issues, get in touch and see how we can help you.
Call or email us today and find out how we can make your life easier.