Shareholder AgreementsWhile it is not a legal requirement to have a shareholders’ agreement in place when you set up a company, many professionals agree that it is crucial to know in advance who will run and control the business, what decisions will require consent from other parties and what will happen if one party wants to exit.
A shareholders’ agreement is a contract between the shareholders of the company. It sets out how the company will be run, which shareholder/director can make which decision, what happens if one wishes to leave, what happens if the company is closed down.
Importantly, the shareholders’ agreement is a private document between the shareholders of the company and, therefore, does not have to be registered with any government department. Having said that, the document is still enforceable in a Court. It is possible, sometimes, to draft the Memorandum and Articles of Association of the company to incorporate the terms of the shareholders’ agreement.
Many companies simply rely on the goodwill and trust that exists between the shareholders. However, this trust can break down if there is a falling out or if an unexpected event occurs. A good example of this is when a shareholder wishes to leave the company and wishes to dispose of his shares- the shareholders’ agreement will deal with the share sale process, how the price is calculated and to whom the shares may be sold.
Without a shareholders’ agreement in place, the shareholders may find that the general company law position does not deal with matters in the way that they would have intended.
The commercial team at TWS can help draw up an agreement to regulate your business relationship and advise on how to structure your business, both to succeed commercially and be tax efficient, as well as what documents you will need.
Please contact one of our experienced lawyers for more details. Email us at email@example.com or call +971 4 448 4284.