Why do I need a shareholders' agreement?

In the absence of a shareholders' agreement, the responsibilities and obligations are governed by the Company’s Memorandum and Articles of Association and general company law.

The downside of this being that they tend to be in favour of majority shareholders. The Articles of Association will afford little guidance and assistance in relation to the operation and day-to-day running of the business and transferring of the shares and in view of this it is always advisable for the shareholders of a company to be governed by clear principles that cover aspects that would otherwise potentially be overlooked. The effect of a shareholders' agreement is to enable the company, it shareholders and directors to operate more effectively and in accordance with unambiguous and complete provisions.

A shareholders agreement will ordinarily cover issues including the transfer of shares and their valuation procedure, drag and tag provisions to afford protection to both minority and majority shareholders in the event that they wish to sell their shares and a complete and exhaustive list as to what matters require unanimous and majority consent. This matters are considered to be fundamental aspects governing the relationship between the shareholders and the company. We are able to both advise on and draft shareholders agreements tailored to our client's needs and requirements.