At the start of a business relationship, it is tempting to think that you may not need a shareholders’ agreement. The possibility of disputes may seem remote, and you may think that disagreements can be easily resolved by negotiation and compromise. Over time, however, recollections can differ and relationships can change. Put very simply, if something is important, make sure it is written down. This is where a shareholders’ agreement becomes indispensable – it ensures that there is a common understanding about how the company will be run and what has actually been agreed.
It might help to think of a shareholders’ agreement as an investment to protect one of your most important assets – your business and your livelihood.
Whilst it is, unfortunately, not always possible to stop disagreements from escalating into more serious disputes, a good shareholders’ agreement can help by ensuring that there is a clear mechanism for resolving deadlock and even managing departures. Where appropriate, restrictive covenants might also be used to prevent a departing shareholder from exploiting their knowledge of the company’s workings and harming the hard-won goodwill of the business.
Not all exits are acrimonious, and planning for the future is an important part of the lifecycle of any business. A shareholders’ agreement can also be useful in these circumstances to lay out a clear pathway for the future. It can also be used to work alongside a Will and Lasting Power of Attorney to ensure that there is always someone able to take decisions, and ensure the wellbeing of the company and its employees if the worst happens.
Taking the time to address these issues early on is not easy, but it is important. Our guide to shareholders’ agreements talks about some of the key considerations in more detail. We hope that you find it helpful.
If you have decided that you would like to protect your company by having a shareholders’ agreement, please download, complete and return our shareholders’ agreement questionnaire. This might also be a helpful framework for your discussions. Once we have received your questionnaire, we would be pleased to contact you to discuss your requirements and to provide you with an estimate to draft the shareholders’ agreement for your company.
