Why Shareholders Agreement Are Important
Are you planning on starting a company or are you already a shareholder of a company?
We understand, especially during the initial stages of starting and running a company, you and your business partner(s) are on good terms and have grand plans for the company. It seems that you all get along and understand each other.
However, it is quite often the case that when business intertwines with personal relationships, running a company may put a strain on your relationships.
Disagreement, conflict, misunderstandings and poor communication will undoubtedly arise.
A Shareholders Agreement is therefore a good idea to have in place within your company, to ensure the company runs smoothly and profitably with minimal conflict and confusion between you and your business partner(s).
So what is a Shareholders Agreement you may ask?
It is a contract negotiated by you and your business partner(s) to govern your relationship and business arrangements within the company. The Shareholders Agreement will detail yours and your business partner(s)’s rights, responsibilities, obligations and liabilities, and will ultimately protect you and your business partner(s)’s interests.
So in other words, if difficulties arise, no matter how small or large, it can be very helpful to have a clear view of what you and your business partner(s) agreed to before disputes arise, and these agreements will be outlined in the Shareholders Agreement.
Usually, the Shareholders Agreement will cover the following:
– Your and your business partner(s)’s rights and obligations
– The management and operation of the company
– The appointment of Directors
– Your voting rights and the issue of new shares
– The options available to you and your business partner(s) should another shareholder leave or come into the company
– The restriction of competition within the company
Most Shareholders Agreement will cover the above, however, your Shareholders Agreement will reflect the unique needs of your own particular company.
Therefore, if you are thinking of drafting a Shareholders Agreement for the benefit of your company and relationship with your business partner(s), or you wish to review an existing Shareholders Agreement, or you simply have any questions about anything in this article, don’t hesitate to give us a ring on (02) 9723 8080 or email us at firstname.lastname@example.org for a friendly, confidential chat.
We will make sure that you understand the effect and consequences of every clause in your Shareholders Agreement.