We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA

We take a look at the importance of a shareholders’ agreement and what to include in one

A shareholders’ agreement is a limited company’s equivalent of a partnership agreement. Where more than one shareholder is involved in a company, such an agreement is useful in regulating the way the business is to be conducted, dealing with any disputes or unexpected events that arise, as well as providing protection for the shareholders’ investment and establishing a fair relationship between the shareholders.

It is not mandatory for a company to have a shareholders’ agreement as it does not need to be filed in the public domain, but for the reasons stated above, it is highly recommended. There are many advantages of a shareholders’ agreement including:

  • shareholders falling out
  • regulating management of the company
  • offering protection for both the majority and minority shareholders
  • controlling the transfer of shares
  • potentially linking shareholdings to employment
  • applying restrictions on exit of a shareholder
  • resolving disputes
  • demonstrating business stability
  • offering the mechanism for a varied dividend policy.

As a follow-up to our previous factsheet on partnership agreements, ACCA has brought you a factsheet on the importance of a shareholders’ agreement and a helpful checklist of matters to include in one.