Shareholder AgreementsMTM Legal
Shareholder Agreements reflect the relationship between the owners of a company and the company itself. A clear, precise and fully documented contract between the owners of the business can be used to settle this relationship.
The Agreement may regulate:-
- The activities the company will carry on, and its intended rate of growth.
- The intended exit route and the timescale for achieving it.
- The company’s dividend policy (ie the proportion of profits to be paid out as dividend and the proportion to be retained to fund the business).
- The composition of the board of directors and senior management team, and their remuneration and other terms of employment.
- Levels of borrowing.
- Future funding (e.g. how much will be needed, the form it will take, how much each of the parties will put in, whether third parties will be allowed in and on what terms.)
Additional provisions can be made to control :-
- Issue further share capital.
- Change the company’s articles of association.
- Buy or sell a business, or any asset of more than a certain value.
- Buy or sell a significant stake in another company.
- Acquire or dispose of any premises.
- Appoint or remove a director.
- Award directors or employees more than a certain level of remuneration, and/or dismiss a director or employee earning more than that remuneration.
- Borrow above a certain level, or grant security over the company’s assets.
- Incur capital or hire purchase commitments above a certain level.
- Take out or vary insurance other than for full replacement value.
- Buy any of the company’s shares back from a shareholder.
- Take action to wind the company up.
- Prevent favourable contracts or arrangements between the company and its directors or shareholders other than on agreed terms.
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