Shareholders' agreement: single majority retains control

About this shareholders' agreement

A shareholders agreement is an essential document to confirm the rights of the shareholders, one against another and against other stakeholders in the business, and to set out how the shareholders intend to operate the company. It takes over where company law stops.

This version is drawn for a situation where a single shareholder controls the business of the company. There is provision for the introduction of minority shareholders but the control of the company remains with the majority shareholder

Disputes between shareholders and other stakeholders are expensive and can be disruptive and detrimental to the on-going operation of the business. Having a clear agreement in place reduces the likelihood of disputes and makes resolving any that do occur easier. A clear and comprehensive agreement also reduces the need for subjective decision making by an arbiter or judge that can give shareholders, and particularly minority ones, so much uncertainty and worry.

The document additionally includes provision for transfer of the shares by majority shareholder to several others who collectively own more than he does alone. It minimizes the opportunity for a takeover by minority shareholders.

The law in this shareholders' agreement

The law in this shareholders' agreement is based on both company law and contract law. Within the structure of company law, you can choose the terms that best suit your situation, so you do not need to study any particular law to be able to edit your shareholders' agreement. The agreement is up-to-date and very comprehensive.

When to use this shareholders' agreement

This agreement is suitable for any private company, no matter what its business. It is about rights, power, control and safeguards, not about your business.

A company's shareholders agreement can be redrawn at any time, but is commonly done when the relationship between the shareholders and the directors changes

Shareholders' agreement features and contents

No other shareholders' agreements for sale on the Internet are in plain English or are so comprehensive in their cover of legal issues and the drafting explanations and tips supplied. Net Lawman's slogan "Real law, in plain English" is as true of this document as of any others.

In many areas, we give you complete alternative paragraphs and explain in the notes when each will be the most suitable for you.

This document contains over twenty commercial paragraphs as well as what you might call technical legal provisions. You can choose which are suitable for your needs. Many are based on our practical experience as solicitors of dealing with shareholder disputes.

Contents

• obligations of the company to the shareholders (the company is also a party to the agreement);
• how shareholders will maintain their rights if they are not present at meetings;
• roles of directors and actions by the company or a director which require shareholders' consent: controls and redistributes power between shareholders so that majority shareholders cannot force decisions;
• new shareholder rights and restrictions: even if he is a trustee in bankruptcy;
• how to deal with new intellectual property;
• transfers of shares and rights of pre-emption: when allowed, under what conditions and to whom;
• exit strategy: the hidden bomb if neglected;
• life insurance;
• publicity about the deal;
• confidentiality;
• use of a shareholders own assets in the business;

Other versions of this shareholders agreement

We offer a number of agreements for shareholders. This one is based on our standard version, adapted to strengthen the control of a single member.