What is a Shareholder Agreement?
A shareholders agreement is an arrangement between a company’s shareholders describing how the company should be operated and details the shareholders’ rights and responsibilities.
Shareholder agreements are a useful tool to deal with a number of key issues. They serve the dual purpose of driving out exactly what is intended from a legal and tax perspective, and recording the key commercial issues which have been agreed. A well-drafted shareholders agreement will act as an insurance policy to cater for the unexpected.
Shareholder Agreements and UK Contract Law
At Turcan Connell, we provide our clients with detailed advice and recommendations on the content of shareholder agreements, looking not only at the aspects affected by contract law in the UK, but also giving careful thought to the minefield of tax issues such as Inheritance Tax and Business Property Relief.
Key Issues in Shareholder Agreements
The key issues in relation to shareholder agreements covered include:
- Rights attaching to shares – voting, dividend, the right to appoint a director
- Deemed transfer provisions
- Good leaver/bad leaver provisions
- Drag along/tag along provisions
- Cross options on death
- Minority protections
- Dividend policies
- Shareholder dispute resolution such as liquidation, Russian roulette, Texas option.