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The Importance of Shareholder Agreements

Reasons to choose Wilson Browne

In today’s climate there is no legal requirement for a business to have one in place, but it has become increasingly favourable to ensure your business has a documented agreement to help clearly define the rules and regulations upon which the shareholders, the company and its directors are bound.

Its existence can help;

  • Act as a ‘go to’ manual allowing all parties to have a better understanding of their rights, obligations and restrictions.
  • Aid funding requests to banks or creditors by demonstrating the stability of the company.
  • Outline the procedure for transferring or valuing shares.
  • Outline ‘tag along’ and ‘drag along’ provisions.
  • Minimise any potential future disputes which could cost time and money.

With the arrival of Covid19 and its effects on both the current and future economy, businesses of all sizes are finding themselves quibbling over matters they have not had to deal with before.

Matters that would be safeguarded by any well structured and documented shareholders agreement include:

  • What happens if a shareholder dies?
  • Is a ‘cross-option’ (Company Will) a resolution to a shareholders death?
  • Can the remaining shareholders buy the deceased’s shares?
  • What happens if a shareholder wants to leave?
  • What happens if a shareholder goes bankrupt?
  • Will a shareholders bankruptcy affect the business financially?
  • Upon a shareholders bankruptcy, who is entitled to their shares?
  • What happens if shareholders fall out or have a disagreement?
  • What happens if a shareholder wishes to set up a competing business?

If you don’t have a shareholder agreement in place or would like to have your current agreement reviewed, Wilson Browne’s award-winning team are here to provide comprehensive legal advice to support you and your business no matter what environment you are facing.

We have a reputation for being approachable and pragmatic and with offices across Northamptonshire and Leicestershire we can meet you at a location convenient to you.

The first chat is always free – call or email us today.

Rebecca Bird

Posted:

Rebecca Bird

Paralegal

Rebecca is a Paralegal in our Company & Commercial Team based at our Northampton  office. She assists our senior fee earners in dealing with acquisitions and disposals, mergers and corporate reorganisations, management buy-outs, commercial agreements, shareholder disputes, corporate finance and legal formations. Rebecca is currently studying…