What is a Shareholders Agreement?
A shareholders agreement is exactly that; an agreement between the shareholders of a company. There is no requirement that a shareholders agreement must contain particular information or deal with particular shareholder matters. However, most shareholder agreements cover at least some of the matters outlined in this guidance.
A typical shareholders agreement will have the following aims:
- to protect the shareholders' investment in the company;
- to establish and record an agreed relationship between the shareholders;
- to record the shareholders' intentions for the company; and
- to promote the smooth running of the company.
The above aims translate into an agreement containing very specific, important and practical rules relating to the company and the relationship between the shareholders.
The key provisions in a shareholders agreement are arguably those relating to the:
- Sale of Shares
- Veto Rights
A shareholders agreement can regulate the sale of shares in the company, including provisions to prevent undesirable third parties acquiring shares.
These provisions primarily protect shareholders who hold less than 50% of the shares in the company, giving them more input into fundamental decisions.