If you own a small business with two or more shareholders it is important that you have a shareholders’ agreement in place. Whilst it is not a legal requirement to do so, not having one could spell trouble in future.
A shareholders’ agreement governs the way business between shareholders is conducted and can provide direction and stability. It implies that the shareholders have mechanisms in place to deal with future events and/or disputes and particularly how an individual’s share will be purchased following the event, for example if the person goes bankrupt or has a long-term illness. The agreement sets out how the shares are valued, who they can be purchased by, whether they are paid for outright or on a deferred basis and other provisions.
Without a shareholders’ agreement, in the event of a death of a shareholder the shares are usually treated as part of the person’s estate and go to their beneficiaries. Also if a shareholder chooses to leave the company the ongoing shareholder(s) may wish to apply restrictions on the exiting shareholder’s ability to start a competitive business. In both cases a shareholders’ agreement could prove invaluable in protecting the interests of the company.
02/07/2018
View all >
18/04/2024
MTD for ITSA
The Institute of Chartered Accountants in England and Wales (ICAEW) has warned that just five Making Tax Digital for income tax self assessment (MTD for ITSA) software products are ready for beta testing on 22 April.
READ MORE
7.4m still struggling to pay bills
Around 7.4 million people in the UK struggled to pay a bill or a credit repayment in January, according to the Financial Conduct Authority (FCA).
Small firms ‘treading water’ on investment
The British Chambers of Commerce (BCC) has warned that UK small firms are ‘treading water’ on investment
Sign up to keep in touch to receive our latest news and industry updates.
* *
Yes, I would like to receive email updates providing me with the latest finance news, advice guides and details of future events.