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Legal agreement to cut out risks; ANNA HAY (pictured), solicitor at eaton smith, says your company may well need a shareholders' agreement.

MANY business owners are busy running successful companies often with close family or friends and with no problems arising.

So why do we recommend you have a shareholders' agreement? A shareholders' agreement can set out provisions governing the management of the company and can include matters on which shareholders' approval is needed. A shareholders' agreement can include detailed provisions tailored to the company dictating what should happen as and when a shareholder wants to or is required to sell their shares.

A shareholders' agreement can be used to regulate what would happen to employee shareholders' shares should they leave for whatever reason.

While many companies run smoothly for years with no fall outs between shareholders, this is not always the case.

It is therefore sensible to formalise in the agreement, from the outset, the approach that will be taken if the relationship does turn sour, so if disputes do occur, there can be specific provision laid down, such as mediation and arbitration for dealing with them.

A shareholders' agreement can include a dividend policy to which the company should comply.

And restrictions to prevent an exiting shareholder from setting up or working with a competing business can be included in a shareholders' agreement.

A shareholders' agreement is a private document so its content can be kept confidential, unlike the content of the company's articles of association.

An interested third party, such as a bank, may require sight of a shareholders' agreement as evidence that the company is stable and well run.

The above points outline some key reasons for why a company should put in place a shareholders' agreement, but there is no such thing as a "standard" shareholders' agreement.

We can provide a bespoke agreement drafted to reflect the specific requirements of each company.

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Copyright 2017 Gale, Cengage Learning. All rights reserved.

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Publication:Huddersfield Daily Examiner (Huddersfield, England)
Date:Sep 14, 2017
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