It is hard to overestimate the value of a proper Shareholder Agreement for the management of the relationships between the fellow shareholders of a company. This importance is even more pronounced where one or more of those shareholders are also Directors or Senior Managers in the company.
Common problems with share ownership
We are often asked by clients for advice on their rights in relation to their shareholding in a company, and the issues are usually heightened in owner managed businesses. This is understandable as the shareholders may in the worst case scenario find that the shares of a key shareholder would pass to that person’s widow or widower, giving them an unexpected influence on decisions, and perhaps leaving the business vulnerable in all sorts of ways. It may also be as simple, and as difficult as the heirs of the shareholder wanting either no contact or too much involvement with the company. These situations can become very personal.
Examples of the issues that arise include:
- decision making;
- division of investment and earnings;
- changes in financial and or commercial contributions not adequately reflected in the shareholders’ respective earnings;
- difficulties in addressing a Director or Manager’s performance issues where they are also a shareholder;
- difficulties associated with a minority shareholding, such as the risk of further dilution of the holding;
- consequences of the death or long term illness of a Director/ shareholder;
- the shareholder’s need for a planned exit route (whether for career or financial reasons
The very best solution is to get a Shareholder Agreement in place as part of the process of bringing in a shareholder or making an investment in a company.
The next best solution is to get a Shareholder Agreement agreed and in place as soon as possible, but most importantly before any significant disputes arise.
Getting the Shareholder Agreement in place
This is an interesting and often enlightening process, and needs to be approached with some maturity and a calm, co- operative approach in order to get to an agreed position on all of the key issues which are to be included in the agreement for your particular company.
We can help you identify the issues which you need to consider including in the Shareholder Agreement, and work with you and where appropriate your accountants (since tax often has a bearing on some of the decisions to be made) to arrive at the appropriate Shareholder Agreement that fits your company and accurately reflects the dynamics within your company, and where appropriate with its owner/ managers/ key staff and other investors.
FREE initial enquiry
To discuss your legal needs, please call Marie Huntley on 020 3609 8764.
Simply outline the situation you're facing, and we'll tell you how we can help and what it will cost.
There's NO CHARGE for the initial conversation. That's right. It's completely free. Zilch. Nada.
By the way, our fees are often fixed or capped to help you budget, and we send invoices monthly so you can spread the cost.