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Shareholder Agreements

A shareholders’ agreement is a private contract between the shareholders of a company that regulates the relationship between them and the company. It sets out the way the company is managed, the rights and responsibilities of the shareholders and the ownership and protection of the shareholders’ shares.

Although it’s private, it’s a legally binding contract and we therefore advise that you speak to a lawyer who specialises in company law when drafting a shareholders’ agreement. This is where we can help.

Why is a shareholders’ agreement necessary?

You can’t underestimate the importance of a shareholders’ agreement. It not only regulates the involvement of the shareholders in the company, but it can help avoid any disputes which may cause financial and reputational harm.

When you undertake a shareholder position at a company, it’s likely that everyone involved is in agreement of the rights, responsibilities, shares and the way the company is managed. However, disputes between shareholders do happen.

If disputes do arise, and there’s no official agreement in place, it can be difficult to negotiate a resolution. A shareholders’ agreement therefore serves as an insurance policy in the event of a future dispute.

  • All service agreements longer than 2 years in length require shareholder consent
  • The company must keep a copy of the service agreement at its registered office for at least one year following its expiry or termination
  • A company must not make termination payments exceeding £200 without the permission from its shareholders
  • Any terms which attempt to excuse a director from liability for default, negligence, breach of duty or breach of trust are void in law

What type of disputes may arise between shareholders?

There are a number of disputes which may arise between shareholders if the shareholders’ agreement is not drafted correctly, this includes:

  • The imbalance of power between directors and members in relation to salary and bonuses
  • The accidental transfer of any shares – for example, as a result of bankruptcy of the death of a shareholder
  • A disagreement of the change of business direction
  • A disagreement of changes to roles and responsibilities of shareholders
  • A shareholder exiting the business and starting up a competitor business
  • The entry or exit of existing board members

These are just a few of the potential disputes that can arise in the future if your shareholders’ agreement is not drafted correctly. We therefore highly advise that you speak to a specialist company law expert to ensure you’re covered.

What needs to be considered when preparing a shareholders’ agreement to prevent any future disputes?

There are many things to consider when preparing a shareholders’ agreement to help prevent disputes arising in the future, such as:

  • How the business will be run
  • What the responsibilities of the shareholders, managers and directors are
  • The procedure for the removal of directors by shareholders
  • Details of the profit share between shareholders
  • Details of remuneration of directors and managers
  • The onboarding process of new shareholders
  • How disputes will be resolved
  • How shareholders will exit the business
  • The voting procedure and who has rights
  • Clauses to prevent shareholders existing and starting up a competitor business
  • The process for any amendments to the shareholders’ agreement
  • “Tag and drag rights”

No one can predetermine what potential disputes may arise in the future so it’s impossible to cover everything. However, a lawyer specialising in company law has a vast amount of experience in the various problems that arise, so is best placed to advise on making your shareholders’ agreement as secure as possible.

Shareholder Agreements

What do you do if you have a dispute with a shareholder?

If you have a dispute with a shareholder, or a dispute relating to a shareholders’ agreement, you should speak to a specialist lawyer without delay. The quicker disputes are resolved, the more chance you have of preventing any financial or reputational damage.

We have specialist lawyers in commercial dispute resolution and have specialist commercial mediators who can try to reach a successful resolution without the need for expensive litigation.

Our employment law specialists have helped businesses from a vast number of industry sectors, both online and offline, in areas such as:

  • Contracts, policies and procedures
  • Contractors and agency workers
  • Disciplinary and grievance
  • Equality, diversity and discrimination
  • Flexible working agreements
  • Health and safety
  • Managing sickness leave
  • Pensions
  • Recruitment
  • Restrictive convenience
  • Restructuring and redundancy
  • Settlement agreements
  • TUPE

If you’d like to discuss our employment law services, contact us today and one of our specialists will be happy to advise you.

How much does an employment lawyer cost?

It’s difficult to say how much it will cost for an employment lawyer to represent you until we know the circumstances of your case. However, we want to be as transparent as possible when it comes to the legal costs involved in an employment case, so have set out the fees involved in our Fees Transparency page. For more details about our fees and how we can help, simply contact us today and one of our experts will be happy to discuss this with you.

How can Inspire Legal Group help?

Our business lawyers are specialists when it comes to mitigating the risks involved in disputes between shareholders by preparing shareholders’ agreements to suit your business.

They’re innovative leaders who are professional, proactive and fully trained.

For your initial consultation, contact us today and one of our specialists will be in touch.

Contact Us

For your initial consultation, contact us today
and one of our specialists will be in touch.

Contact Us