Manage the relationship between your company and your shareholders with a shareholders agreement.
With great power, comes great responsibility. And, in the case of a company’s shareholders, that power needs to be carefully managed and defined.
Shareholders are the owners of a limited company and often comprise founders and key investors. These shareholders have the power to influence and change a business, and as a result, a reliable Shareholders Agreement is needed.
When a shareholders agreement is needed
When a company is formed
When you form your company and prepare to dole out its first set of shares, it’s important to have a Shareholders Agreement in place. This allows you to define the relationship from the get-go, avoiding potential disputes in the process. While the thought of a communication breakdown is the last thing on your mind, it’s wise to hope for the best and prepare for the worst.
Regulate the power of your shareholders
With successful investment comes the existence of influential investors. Similarly, investors might opt to negotiate a new shareholders agreement/investment agreement, and will want certain protections and rights. Ensure you’re not giving away the bones of your business with robust Shareholder Agreement terms.
One of the many strengths of a Shareholder Agreement is its ability to protect confidential business matters and to oblige shareholders to be mindful of the information they share. A restrictive covenant will impact individuals that are no longer shareholders and is largely used to protect the business in the future - for example, from competitors.
Deed of Adherence
The phrase “deed of adherence” will frequently crop up when a Shareholder Agreement is mentioned. Put simply, a deed of adherence binds a new investor to the terms originally set out in a Shareholders Agreement. Handy.
How to get started
Who this can affect
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