Who can use this Shareholders Agreement?
This shareholders’ agreement is suitable for two individuals who set up a limited company to run a new business where each of them will have 50% of the shares. For a three party form of this shareholders’ agreement, see Document A166
What is this Shareholders’ Agreement for?
It sets out capital contributions, profits policy, board structure and overall management arrangements as well as dealing with the possibility of a shareholder wanting to sell or a deadlock arising between them.
What are the main issues?
Share capital: the amount and whether this might be issued in return for assets or intellectual property rather than cash.
Directorships and voting. With a 50-50 ownership, will this be reflected at board level with each shareholder as a director? Either way, both shareholders will need to agree on major decisions and some or all of the minor ones as well.
Management roles. The precise role of each shareholder might be spelt out with regard to their management and other duties. Also any arrangements on earnings.
Sale of shares. Members of private company cannot freely sell their shares – the directors control transfers of shares. But if one party wants to leave, the shareholders agreement will usually contain a procedure for permitting this in certain circumstances and for the valuation of shares.
Restrictions. If a shareholder wants to leave, the agreement may prevent her from setting up in competition or sharing any secrets with a competitor
Disputes. If two equal shareholders in a company have a major row about the direction of the business, a “deadlock clause” could be useful. It can offer a way of going through a mediation process to try to resolve the issue. Failing this, the deadlock clause may provide for one party to buy out the other or for the company to be wound up.
What detailed terms does the contract contain?
This is an eight page document with 18 clauses covering
- the nature of the company’s business
- profits policy
- the company’s directors, chairman and secretary
- day to day conduct
- the company’s bank account
- accountants and registered office
- matters requiring the consent of both shareholders
- exercise of voting rights
- deadlock procedure
- death of a shareholder
- a miscellaneous clause addressing partnership, assignment, notices, waiver, ambiguity and governing law.
For more information on each of these sections, see our Explanatory Notes which you will receive when you download the document from our website. Also see our Checklist for Shareholders Agreement.
If you have any questions about a contract and/or want to see these Notes before you buy, please let us know by using our contact form
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When I download the document, can I change it and/or use it more than once?
Yes, all ContractStore’s templates are in MS Word and you can use the contract on more than one project. For more information, watch the video on this page of our website or see our FAQs
ContractStore supplies templates and is not a law firm. But all our templates are written by experienced lawyers so we can arrange legal assistance for customers who need special terms in one of our documents or a bespoke template. For more information see our Legal Services page.
Contract author: Giles Dixon is a solicitor with considerable experience of setting up shareholder agreements, whether for start-ups or major joint venture companies.
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If you have any questions about a contract and/or want to see the Explanatory Notes before you buy, please let us know by using our contact form
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Who can use this Agreement for sale of shares? Anyone who wants transfer control of a company from a Seller to a Buyer, where the Seller and Buyer are the only shareholders in a company.…