Shareholders' agreement: new company
- Attorney approved
- Plain English makes editing easy
- Guidance notes included
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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.
There are two essential reasons for having a shareholders' agreement:
- The first is to protect minority shareholders' rights and investment value. Without an agreement, majority shareholders may force issues that are not in the minority shareholders' interests and that could reduce the value of the minority shareholders' interests in the company.
- The second is clarity of decision making. In circumstances where shareholders of any size are also directors, operational decisions that would ordinarily be taken by directors accountable to all shareholders or made only with the consent of all shareholders might be made instead in the interest of a single shareholder without having been brought to the attention of the others. A good shareholders' agreement should set out the decisions that must be made in the capacity of a shareholder rather than a director. Similarly, directors may feel unable to take business decisions (and act as directors) without shareholder approval.
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.
This shareholders' agreement protects the interests of the minority shareholders and provides a detailed framework of freedom for working shareholder-directors.
The document additionally includes provision for valuation of the shares of a departing shareholder by reference to a valuation based on your instructions to an accountant. The valuation depends on the parameters used, so your instructions are critical. We have provided a comprehensive version which you can edit according to the deal you wish to strike with a selling shareholder.
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.
For a new company, it can be put in place from Day 1, or shortly afterwards. The best time is always "now". Clarity on how decisions are made will let you sleep better at night, whether you hold a small proportion or a large majority of the shares.
All the shareholders must sign the shareholders' agreement but there are no rules about which of them must manage the process of taking the agreement through to signatures. Any shareholder could suggest that the document is necessary and could start the discussions.
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.
Examples of these provisions are:
- 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;
- key man insurance;
- publicity about the deal;
- use of a shareholders own assets in the business;
Other versions of this shareholders agreement
We have six versions of this shareholders agreement with only small differences, making choice easy. All are designed for a private company in any business with any number of shareholders, some of whom will be directors. All assume that some shareholders will work in the company, but that is not essential.
This one is for a new company. Other versions are for existing companies and for companies where there has been a major debt investment, possibly by a minority shareholder
- Shareholders' agreement: new company; some shareholders have also invested debt
- Shareholders' agreement: existing company
- Shareholders' agreement: existing company; some shareholders have also invested debt
This document was written by an attorney for Net Lawman. It complies with current South African law.
What other customers thought
Average customer rating
By Karen Tindall 02 May 2015
I am a lawyer but my precedents are old. I needed an updated doc which takes account of any requirements of the new Companies Act. The document is phrased simply and is easy to understand by client. Would recommend.
By Jacques Van den Bergh 11 September 2014
Your document did the job. Easy to complete, comprehensive and easy to understand.
I wanted to us it to set up a new company. However a legal advisor has told me that I should rather separate shareholder agreement from the set up agreement and get a Memorandum of Understanding in addition to the shareholder agreement. I will be downloading this document from your site shortly.Great Site indeed.
By Fiona Goldrick 19 January 2014
My biggest concern was that i would purchase the wrong doc as I was unsure of exactly what I needed, but by reading the summaries and then seeing the return policy if i got the wrong one, I was reassured. I bought the shareholder's agreement for a new company. It is comprehensive and easy to understand. It covers many things that we wouldn't have considered if we drafted our own from scratch. It raised issues of insurance that I wouldn't have considered and laid out different exit strategy options. I also now know I need to check the MOI - I would have preferred some more guidance on the MOI though, i.e. where to find it, and what it should say. I haven't looked on your site yet - maybe you have that. I would definitely recommend your services - thank you!
*One last comment: your rating scale should indicate if 5 is excellent and one is poor or vice verse :) - I see the stars at the bottom, but the drop down should be more explicit.
By Jeetesh Keshaw 15 May 2016
The document covers almost every aspect we could think of as shareholders.
Also nice was a follow on personal email from the author who asked if there was anything to assist with.
There were one or two parts we did not understand well, and have communicated with the author to explain.
By Lindsay Mentor 22 February 2015
Good base document, service excellent, document had to be modified quite a bit to meet the requirements of the Agreement sought.
"The website is great, the access easy, documents professional. All very smart. Immediately got a good impression of Net Lawman."Hendrik J Pfaff, CFA, Stellenbosch, South Africa
"I have found the product exactly what I wanted and the notes helpful - as well as it being easy to locate, buy and download. There should be a better way of making your product more widely known. I have recently had experience of a tailor-made lease and this left a lot to be desired - whereas your product is well researched and ticks all the boxes."Ted
"...Yes very useful. I understand the terminology etc as I've seen a fair few legal docs before. Notes are very helpful. Gives me some base insight without the expense of a solicitor!"John K