05.12.08
No-one gets married expecting to get divorced. Equally, one believes that our
other half will not go on a massive spending spree on the joint account& but
is there anything to stop them?
What about in business? Shareholders may
fall-out with each other, or disagree on the methods of doing business.
Directors may act alone and bind the company. A well thought-out Shareholders'
Agreement at the outset may provide for situations where parties have fallen out
while avoiding expensive legal battles. More importantly, Shareholders'
Agreements can often prevent the disputes arising all-together by ensuring that
all shareholders know in advance exactly what their rights are and what level of
control they have over the company's affairs and management.
Although not
many people will enter pre-nuptial agreements, most are likely to prepare a
will. But many companies do nothing to prepare for the death of a shareholder.
Some businesses may be wholly reliant on one or two individuals, in which case
it may be disastrous to the business if they departed suddenly. Or it may be
that the dependents of a shareholder may be relying on capital tied up in the
company in the event of that shareholders' death, however, unless this has been
provided for in a shareholders agreement it may be very difficult to get that
capital out of the company allowing the other shareholders to use it as an
interest free loan forever. This is not only relevant in the event of the death
of a shareholder, but also where a shareholder wishes to retire or change
career.
Couples do not tend to worry that they will wake-up and find
their partner has turned into a megalomaniac, but there may be nothing to stop a
fellow shareholder from selling their shares to someone else and can suddenly
find themselves in business with someone unexpected. Even if a fellow
shareholder would never voluntarily sell their shares, if they were to lose
their shares in a messy divorce the former spouse may end up owning those
shares. A Shareholders' Agreement can prevent this.
When setting us a
company the dream is often that one day the business will be very successful and
could be sold for millions. But even if extremely successful, a private
company's shares will be worth very little unless all of the shares are sold
together. A Shareholders' Agreement can prevent a minority shareholder having
the ability to scupper the deal of a lifetime, which may even be done by being
unavailable rather than being difficult! A Shareholders' Agreement can prevent
such a situation.
A Shareholders' Agreement may be a document that
provides for a number of situations that will hopefully never happen, but it can
also provide detailed guidance as to how the business will be run and unlike the
Memorandum and Articles of Association, a Shareholders' Agreement is a private
document.
So, a Shareholders' Agreement can:
A Shareholder Agreement could be of crucial
importance in any company where there is more than one shareholder. This may be
even more significant where shareholders are also family members. The agreement
is there to ensure that decisions are taken by consensus and discussion rather
than unilateral imposition. It will provide clarity and certainty as to what can
or cannot be done, resulting in a reduction of the areas in which there might be
conflict. The philosophy is: hope for the best but prepare for the worst. Are
you prepared?
For more information contact: Veronica Massie on 020 7299 6922 on veronica@barkergillette.com
Department: Corporate and Commercial > Dispute Resolution
