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Shareholder Agreement Solicitors

A shareholders agreement is a private agreement between the shareholders of a company. It governs the relationship between the shareholders and says what will happen to a shareholder’s shares in certain situations. It can also set out management duties and responsibilities.

If your business plan includes an exit strategy this can be incorporated into and recorded in a shareholders agreement.

A shareholders agreement can detail what is to happen when a shareholder becomes seriously ill and no longer able to work in the business, or dies, in which case arrangements can be put in place for an agreed sale of shares. This can provide financial protection to the family of the shareholder at what will be a very difficult time. We can advise on ways in which this can be made to work.

  • A shareholders agreement can help set out the rights and obligations of a shareholder in relation to both management of the company and protection of their rights as shareholders. A shareholders agreement can be a cost effective way of regulating relationships so as to reduce the possibility for dispute, but setting out ways in which certain decisions will be taken. Ultimately a shareholders agreement can be a means of protecting each shareholder's financial interest in the company, as well as the interests of shareholders families in the event of death or critical illness.

  • When preparing a shareholders agreement we try to ensure that before we begin work all shareholders have discussed and agreed the principles that are to be recorded in the shareholders agreement. If there is disagreement on those principles then it may become necessary for each shareholder to be separately advised. More often that not, however, there is sufficient agreement, making separate advice unnecessary.

  • Shareholders agreements commonly contain drag-along and tag-along provisions. These apply when an offer has been made for the shares in the company, which the majority of shareholders wish to accept. Using drag-along provisions, the majority can 'drag' all minority shareholders with them into the sale, so that all the issued shares in the company are sold to a buyer at the same price per share. Tag-along rights enable minority shareholders to insist that their shares are also sold at the same time and at the same price per share that the majority shareholders have negotiated, so that they can 'tag' along in the sale.

  • Pre-emption rights are, in effect, rights of first refusal. These specify to whom any shareholder who wishes to sell his shares must first offer those shares.

For further information or to speak to one of our experts, please get in touch