What is a Shareholders’ Agreement?
Shareholders’agreements are contracts between some or all of the shareholders of a company. Their main purpose is to regulate the relationship between the shareholders who are parties to the agreement.
They may take many different forms depending on factors such as the nature and purpose of the company, the reason for the shareholders’ agreement, the comparative size of the shareholdings of the relevant parties and the roles of the parties in the company.
Companies are not required to have a shareholders’ agreement. However, they are a useful means of dealing with matters such as the management of the company, board and shareholders meetings, disputes between members, finance, issuing shares, transferring shares, pre-emption rights, rights to information and dividends, confidentiality and restrictive covenants.
A shareholders’ agreement is a private contract and a separate document from the constitutional documents of the company – the memorandum and articles of association – which are public documents. The articles of association contain rules relating to the management of the company and the separate relationship that exists between the shareholders and the company. It is sensible to make sure that a shareholders’ agreement does not conflict with the articles of association.