Shareholders' agreement

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Document overview

A comprehensive shareholders agreement for a company. Use this agreement to protect the rights of each shareholder against each other and also for setting down the strategic management of the company. This agreement could be put in place at the time of incorporation or shortly afterwards in order to set out the balance of shareholder power as the company grows. It is suitable for companies where all or some shareholders are also directors, or where there is a mix of active and inactive owners.
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  • Length:24 pages (6500 words)
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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.

Content:

  • 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
  • Confidentiality
  • 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.

Sample shareholders' agreementFront cover
Click to View Sample

Recent reviews

Great Service
10 March 2024
Easy straight forward to use
Michael Eracleous
Review of the United Kingdom version
Great Service
03 January 2024
Many services and resources offered by Net Lawman add a lot of value quickly, so overall good find. The shareholders agreement gave me 80% of what I needed and was easily able to customise the rest.
Ryan Perryman
Review of the United Kingdom version
Great Service
19 November 2023
I needed to find something to fill an organisational gap and found your shareholders agreement on the web. It was easy to download and make the minor tweaks necessary to protect our present and incoming shareholders. It's comprehensive and saved a bunch of time and legal expense in having something drawn up.
Peter Adams
Review of the New Zealand version
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