- Length:24 pages (6500 words)
- Available in:Microsoft Word DOCXApple PagesRTF
If the document isn’t right for your circumstances for any reason, just tell us and we’ll refund you in full immediately.
We avoid legal terminology unless necessary. Plain English makes our documents easy to understand, easy to edit and more likely to be accepted.
You don’t need legal knowledge to use our documents. We explain what to edit and how in the guidance notes included at the end of the document.
We offer free support by email in respect of editing the document. You can also use our Document Review Service if you want to our legal team to check that the document will do as you intend.
Our documents comply with the latest relevant law. Our lawyers regularly review how new law affects each document in our library.
About this shareholders' agreement
A shareholders' agreement is an essential document to confirm the rights of the shareholders, one against another and against other stakeholders in the business, and to set out how the shareholders intend to operate the company. It takes over where company law stops.
There are two essential reasons for having a shareholders' agreement:
- The first is to protect minority shareholders' rights and investment value. Without an agreement, majority shareholders may force issues that are not in the minority shareholders' interests and that could reduce the value of the minority shareholders' interests in the company.
- The second is clarity of decision making. In circumstances where shareholders of any size are also directors, operational decisions that would ordinarily be taken by directors accountable to all shareholders or made only with the consent of all shareholders might be made instead in the interest of a single shareholder without having been brought to the attention of the others. A good shareholders' agreement should set out the decisions that must be made in the capacity of a shareholder rather than a director. Similarly, directors may feel unable to take business decisions (and act as directors) without shareholder approval.
Disputes between shareholders and other stakeholders are expensive and can be disruptive and detrimental to the on-going operation of the business. Having a clear agreement in place reduces the likelihood of disputes and makes resolving any that do occur easier. A clear and comprehensive agreement also reduces the need for subjective decision making by an arbiter or judge that can give shareholders, and particularly minority ones, so much uncertainty and worry.
This shareholders' agreement protects the interests of the minority shareholders and provides a detailed framework of freedom for working shareholder-directors.
The document additionally includes provision for valuation of the shares of a departing shareholder by reference to a valuation based on your instructions to an accountant. The valuation depends on the parameters used, so your instructions are critical. We have provided a comprehensive version which you can edit according to the deal you wish to strike with a selling shareholder.
The law in this shareholders' agreement
The law in this shareholders' agreement is based on both corporate law and contract law. Within the structure of corporate law, you can choose the terms that best suit your situation, so you do not need to study any particular law to be able to edit your shareholders' agreement.
When to use this shareholders' agreement
This agreement is suitable for any private company, no matter what its business. It is about rights, power, control and safeguards, not about your business.
A company's shareholders' agreement can be redrawn at any time, but is commonly done when the relationship between the shareholders and the directors changes.
Shareholders' agreement features and contents
No other shareholders' agreements for sale on the internet are in plain English or are so comprehensive in their cover of legal issues and the drafting explanations and tips supplied. Net Lawman's slogan “Real law, in plain English” is as true of this document as of any others.
In many areas, we give you complete alternative paragraphs and explain in the notes when each will be the most suitable for you.
This document contains over twenty commercial paragraphs as well as what you might call technical legal provisions. You can choose which are suitable for your needs. Many are based on our practical experience as lawyers of dealing with shareholder disputes.
- Obligations of the company to the shareholders (the company is also a party to the agreement)
- How shareholders will maintain their rights if they are not present at meetings
- Roles of directors and actions by the company or a director which require shareholders' consent: controls and redistributes power between shareholders so that majority shareholders cannot force decisions
- New shareholder rights and restrictions: even if he is a trustee in bankruptcy
- How to deal with new intellectual property
- Transfers of shares and rights of pre-emption: when allowed, under what conditions and to whom
- Exit strategy: the hidden bomb if neglected
- Publicity about the deal
- Use of a shareholders own assets in the business
Other versions of this shareholders agreement
We also offer other versions of this agreement for specific situations. including where a single person owns the majority of the equity, and where shareholders include professional investors who require more complex exit provisions.