Although there is no legal requirement to have a shareholder agreement, every company with multiple shareholders is well advised to consider having one.
Alongside a company’s articles of association, a shareholder agreement sets out the rules by which a company’s shareholders agree to operate their business and provides the basis of a legal framework between them.
Through a shareholder agreement, a company and its shareholders can determine the procedure for taking important management decisions and safeguard the financial interests of each shareholder and their family.
A shareholder agreement can also help to limit the possible harm that may be caused to a company’s business, particularly if things turn sour. In potentially trying circumstances, for example, a shareholder agreement may provide the framework through which certain difficulties can be resolved, either by providing a mechanism for the resolution of disputes or an exit strategy for disaffected or problematic shareholders.
Some of the issues that are typically dealt with in a shareholder agreement include:
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