Shareholders Agreement
In many SME’s a number of shareholders run the company without having any other operating rule than what is recorded in the articles of association of the company. As long as business is going well, it doesn’t pose a problem.
However, in case of unforeseen circumstances, such as death or (long-term) illness of a shareholder, or in case of discord regarding strategic decisions, the absence of detailed agreements can be a cause for tumult, which may have disastrous consequences for both the shareholders and the company.
Anticipate issues with a Shareholders’ Agreement
A Shareholders’ Agreement is an agreement that records the rights and duties of the shareholders involved as well as the most important rules regarding the corporate governance. The following subjects are often addressed in a Shareholders’ Agreement:
- Governance - who decides what?
- Transfer of shares – what happens when a shareholder wishes to sell his or her shares, dies, is absent due to illness or is guilty of conflicting behaviour?
- Dividend policy – what happens when profits are made?
Benefits of having a Shareholders’ Agreement
- The agreement provides a series of previously determined mandatory rules shareholders may turn to in case of disagreement or deadlock.
- It’s an agreement that can be concluded or modified without the intervention of a notary (as opposed to the rules recorded in the articles of association)
- It isn’t a public document, thus offering the advantage of discretion.
- It’s a single set of rules that have been aligned to the size and the structure of the company.
Are you wondering how to protect the interests of your business and its shareholders in the best way? Don’t hesitate to contact one of our experts: