Audit and Accountancy

Shareholder Agreements

The shareholders' agreement is entirely flexible and its purpose is to establish smooth running of the company and the relationships between its various shareholders. Whilst various precedents of shareholders' agreements are available, they must always be tailored to suit the individual circumstances, identifying in advance those issues which will arise in the future and to agree a mechanism for how they will be dealt with. Amongst other matters, the shareholder agreement is used to establish a different relationship between the shareholders than would otherwise be the case. It sets out how matters will be resolved should there be disagreement between the parties. This avoids the need for costly litigation and an enormous waste of management time and hence company value investigating and negotiating issues, the resolution of which can be predetermined at the outset. Another matter typically dealt with is the exit strategy of the shareholders. The shareholders' agreement may therefore define the point at which a company would be marketed for sale and how this would be decided. For example, shareholders may be happy to exit the company once pre-tax profits had reached a certain trigger point or the company had a valuation in excess of a certain figure. Finally, it enables the shareholders to consider what should happen in the event of their untimely death. Shareholder agreements need careful consideration and planning and need expert advice.


News

Events

  • No forthcoming events