When to Use a Shareholders’ Agreement

A Shareholders Agreement governs the relationship between the shareholders of a company. A Shareholder's Agreement is normally created at the beginning of a business venture and is a binding contract that binds the rights and responsibilities of the shareholders. It is intended to dictate how the company and its shareholders will conduct corporate transactions such as share issues. It will sometimes have overlaps with the company constitution, and in such cases the constitution should contain provisions stating that the shareholders' agreement will take precedence over the constitution in such cases.

A Shareholders’ Agreement covers many aspects of share ownership, including:

Whilst there is no legal requirement to have this document, it is a good idea to have one when there is more than one shareholder in the company.
This legally binding document will help you govern the relationship between your company shareholders by setting out the rights and responsibilities of each signatory. This Agreement can save you time, money and stress should a dispute occur. Further, the terms of this Agreement will prove important where share ownership is even (i.e. 50/50) and there is a dispute.

You can customise and download a Shareholders Agreement online in a matter of minutes. It may also be worth hiring a lawyer to ensure your terms are iron-clad and to add any further terms unique to your company. Finally, you will need to ensure all shareholders agree to the terms and issue the Agreement to new members as they come on board.

You can also read more on creating documents on the Lawpath platform.

For more information, read our article on Shareholders' Agreements here!