What is the Law in your Life?

5 things you need to know about a Shareholders' Agreement:

1.   What is a Shareholders' Agreement? A Shareholders' Agreement is a contract entered into among the company's shareholders which, together with the company's articles of association, creates the internal "rules" by which a company is governed.

2.   What areas does a Shareholders' Agreement cover? A Shareholders' Agreement can deal with all aspects of the relationship among the shareholders, including the rights and obligations of the parties.

3.   Specifically...? Protection of minority interests, control of decision-making at board and shareholder level, non-compete provisions, resolution of shareholder disputes, as well as defining the powers of the shareholders (and directors), and the procedures and limits within which the company operates.

4.   Anything else? A Shareholders' Agreement can also regulate share transfers - for example, if a shareholder leaves the company it is possible to have provisions in place to force such a shareholder to sell their shares back to the other shareholders.

5.   What happens to shares if a shareholder dies? Without a Shareholders' Agreement in place, the shareholder's beneficiaries may (or may not!) be able to take over the shares. A Shareholders' Agreement can provide certainty for all concerned - including allowing the surviving shareholders the right to purchase the deceased's shares before they are transferred to beneficiaries.