One of the most important aspects when setting up a company is the shareholders’ agreement. Essentially, a shareholder’s agreement is a contract between the shareholders of a company. Its primary purpose is to protect the shareholders’ investment in the company, to establish a fair relationship, between the shareholders, and to set out certain conditions of how the company is to be governed and operated.
The shareholder’s agreement contains specific and practical rules regarding the company and the relationship between the shareholders. Thus, it is vital that the agreement covers a wide range of areas in order to protect the interest of all parties, especially of the minority shareholders.
Without a shareholders’ agreement, minority shareholders – those who own less than 50% of the shares – will have little control or say in how the company should be governed. Without an agreement, majority shareholders may force issues that are not of the minority shareholder’s interest.
Once in place, a shareholders’ agreement can only be amended with the agreement of all of the shareholders while the company’s articles of association can be changed by a 75% majority – meaning that a shareholders’ agreement provides better protection for minority shareholders.
To learn the basics of the shareholders’ agreement, check out the infographic below from Amorys Solicitors.