What is a Shareholders Agreement?
A shareholder agreement is an agreement agreed upon by some or all of a company’s shareholders.
The agreement is set forth in order to regulate the relationship between shareholders and management, whilst also outlining protective measures governing the rights of any shareholders.
What are Minority or Equal Shareholdings?
If you are a minority or equal shareholder in a company, private or public, you should ensure that you are protected by a shareholder’s agreement. If you are a minority shareholder in a private company, you are unlikely to have any control over how the business is run. This is because private companies are often run by two or three major shareholders. Having a decent agreement in place will protect your position.
What is a Majority Shareholders Agreement?
A majority shareholders agreement can protect a majority shareholder by limiting the powers of the directors or by ensuring that the majority shareholder can sell their shares in the company at any time.
If there is no shareholders agreement, then any disputes between minority and majority shareholders will have to be negotiated via the articles of association. These articles are standard documents that set out various covenants which do not usually protect minority or equal shareholders.
So if you are setting up a limited company it is important to seek advice from an experienced firm of commercial solicitors.