Shareholders’ Agreements - what's the big deal?

Whilst talking to business owners, it never ceases to amaze me how many of them are shareholders in limited companies, yet don’t have any written form of agreement with their shareholders.  Not only is this bad practice, but it can also be extremely serious in the event of a dispute, and could cause great difficulty in the event of the untimely death of a shareholder.

A Shareholders’ Agreement is the fundamental governing document  which, amongst other things, sets out the duties and responsibilities of the shareholders, as well as their rights in the event of a dispute or sale.  Certain clauses in the Agreement are there for the protection of minority shareholders.  There should also be some thought given to how the business should be valued on retirement or death of a shareholder.

If you are a shareholder in a limited company without a Shareholders’ Agreement in place, you could be letting yourself, and possibly your family, in for trouble in the future.