A shareholders agreement is a private contract between shareholders which sets out the way that they will behave towards the company.
There are considerable benefits to having a shareholders agreement; the agreement will bind all the members who signed the document to the terms, and the usual remedies for breach of contract will be available if someone breaches these. Furthermore, a written agreement helps the shareholders avoid disputes as they have already agreed in writing what should happen. Shareholders agreements can restrict the transfer of shares, place restrictive covenants on members leaving the company and protect minority shareholders.
A shareholders agreement does not need to be lodged with Companies House and can be kept as a private document.
One of the main benefits to a shareholders agreement is that it can deal with matters that are private to the shareholders, which would usually not be enforceable through the company articles. This can provide the potentially aggrieved shareholder with a contractual remedy where they usually would not have such a right. The agreement will often also make each of the shareholders aware of their rights and not make them reliant on the default provisions of the Companies Act 2006.
Shareholders agreements are undoubtedly a useful tool and they are a popular option for most companies despite not being a mandatory company document.
Our solicitors can prepare the agreement for a fixed fee and can produce the document urgently if necessary. A shareholders agreement should be a living document and updated as regularly as a company updates its business plan.
Our Commercial Law Team