As someone passionate about the survival of every business, I always advocate drawing up a shareholders’ agreement when setting up a new company.
The purpose of any shareholders’ agreement is obviously to protect the interests of shareholders. But more than that, your shareholders’ agreement will:
- Regulate sale of shares in the company
- Set out shareholders’ rights and responsibilities
- Define elements of protection for minority shareholders
- Define how important decisions will be made
- Govern how the company will be run
My role is to ensure your shareholders’ agreement contains all the necessary specific, important and practical rules relating to your company and the relationship between the shareholders and management of the company.
It may well be at the start you trust everyone totally and nothing ever goes wrong. I truly hope that’s how it works for you but experience shows that 95% of the time things do go wrong.
That’s when you need your shareholders’ agreement to fall back on.
Sadly, family members, friends and investors fall out. Circumstances change and people may need their initial investment back more quickly than envisaged.
Not only do you risk losing precious relationships, you may find yourself landed with expensive legal costs and an acrimonious legal dispute. Setting everything out in your shareholders’ agreement from day one can save a great deal of heartache, pain and money.