Shareholders۪ agreements expect the unexpected

When two or more people decide to go into business together, they often do it in a way which limits their personal liability, meaning that they often choose a private company limited by shares as their business vehicle. Each will be a shareholder and, in many cases, also a director of this limited company.

Your company, once registered at Companies House, will be governed by its articles of association, which is a public document, viewable online. Although many provisions relating to the running of the company will be included in these articles, which often adopt standard provisions such as rights to vote at board and shareholder meetings, rights to dividends and so on, there will also be several important things that the shareholders may want to include in a separate, private, document, that is not visible to anyone visiting the Companies House website.

This separate, private, document is a shareholders’ agreement, and is entered into by everyone who has shares in the company in order to regulate their relationship with each other, in particular what happens in the event of:

• Disagreements or deadlock (for example, where there are two 50/50 shareholders who differ on something important to the business)
• The death of a shareholder
• The exit of one or more shareholders – either via a sale of the whole, or where one or more shareholder wants out, or wants to buy out the others.

Everyone’s personal circumstances are different, and so tailoring a document to try and deal with every eventuality is best served in such a private document, rather than attempting to modify what are often standard Model articles which track the Companies Acts.

A well-drafted shareholders’ agreement can deal with all of these issues in detail, so that, for example, where different rights attach to different classes of shares, or where a family business is involved where succession is key, future events can be dealt with in advance so as to prevent costly disputes in the future.

Battens prepares many different types of shareholders’ agreements across many different business sectors, for clients large and small. We try and work closely with our clients to ensure that no stone is left unturned in putting in place a solution that enables you to focus on what you do best, which is to run your business.

Please contact Brian Levine brian.levine@battens.co.uk 01935 846248 or Katherine Gilmour katherine.gilmour@battens.co.uk 01935 846059 if you would like any further information or would like to discuss your own business venture.

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