A Shareholders Agreement will provide bespoke arrangements directly relevant to your company, the business you are starting, how you and your co-shareholders see the company developing and provisions to cater for any disagreements including how to resolve Shareholder Disputes or general company disputes.
A Shareholders Agreement will take precedence over the standard Articles of Association held at Companies House. A well-drafted Shareholders Agreement should ensure that future problems are avoided, disputes between shareholders and directors are easily and quickly settled and, should it be required, deal with directors’ conflicts, removing a shareholder and company deadlock.
We refer to our booklet “The Importance of a Shareholders’ Agreement” for further information on these matters. At Francis Wilks & Jones we can assist in advising on and structuring a Shareholders Agreement.
A bespoke Shareholders’ Agreement will clarify many fundamental issues, including:
Business ExpectationsRead more
It is vital to clarify from the outset what the company’s owners want from the company in terms of salary and earnings, what the business does and its direction, how decision-making occurs, managing legacy issues (for family businesses) and how one (or more) of the business owners can exit the business in given circumstances (perhaps when it becomes successful).
If properly drafted, a shareholders agreement should be able to set out what the options are and how they are triggered in each of these scenarios.
Company DeadlockRead more
Company Deadlock is one of the biggest problems facing a company where it is set up by an equal number of persons (usually two) and proves impossible to avoid in the event of a company dispute. Quite often the roles are loosely defined, with one party controlling the banking arrangements or perhaps the balance of power not being that which was originally envisaged by one or more parties. In these (and many other) situations a deadlock between either directors or shareholders (but quite often both) can damage the company’s business or lead to insolvency.
A bespoke Shareholders’ Agreement will be able to provide a solution to company deadlock situations where a simple majority (i.e. over 50%) cannot be reached on company decisions. This is of particular importance for companies with 2 common director shareholders where the deadlock leads to an inability to take critical business decisions. See our booklet "Company Deadlock - The Options" for further guidance.
Losses to Business/Mismanagement of CompanyRead more
Quite often a company’s business commences from a previous working relationship, a new idea or concept or just a perceived better way of doing things. As the business develops, the original personalities who started up the company start taking different roles, or have different expectations as to what they expected to receive from the company.
Even worse, this can lead to disputes, allegations of misuse of the company’s bank account, allegations that directors have set-up separate businesses in competition (in breach of their responsibilities to avoid a conflict of interest) or are in any other way damaging the company.
Exit from the CompanyRead more
Not all business owners/co-shareholders have the same expectations for what a new company will provide them with. Some individuals may envisage a quick growth and departure from the business, others may see the business as something which they slowly grow to provide them with a long-term income.
All such circumstances can be provided for by A Shareholders Agreement - for example, a shareholder with a short-term expectation might require a provision entitling the forced buy-out of his/her shareholding and a valuation process for that buy-out. A Shareholder with a longer-term vision may want to limit the drawings from a company to ensure investment and growth. All of these requirements can be provided for.
At Francis Wilks & Jones we can draft a Shareholders Agreement to reflect all of your needs and manage any and all requirements of shareholders. We can do this at the commencement of trading or, if your company has grown or is growing, once it has become established and on an ongoing basis.
Please do not hesitate to contact a member of our team to discuss any matters relating to your business. We look forward to speaking to you.