Description
Why do I need this document?
Chances are, you are one of the many entrepreneurs who have set up business with your best friend. One of you is the creative person, the other the more managerial type. Between you, you have the perfect skills to run your dream business and before you know where you are, the kitchen table has become your HQ and the business is flying along. “What could possibly go wrong”, I hear you ask? “We have known each other for years and don’t need a formal agreement with each other. There is already enough to think about just running the business. We have set up a limited company so what more do we need?”
You need a Shareholders Agreement to protect your investment in your business, your friendship and your sanity! It will regulate how you run the business and protect your shareholdings. Without it, if your friendship starts breaking down, there is nothing to stop your friend from setting up an identical business next door. Your friend may decide she/he has had enough and sell her/his part of the business to someone you don’t know or even particularly like. More importantly, if you truly intend to run a serious business with the aim of attracting investors or selling it in years to come, a Shareholders Agreement will reassure them that they are investing in a properly run business and not some hit and miss outfit.
When do I use it?
As soon as you have set up your limited company. You will already have the Articles of Asssociation which would have been provided to you on incorporation by Companies House. This Shareholders Agreement will take precedence over the Articles. Once you have signed it with your partner/friend, it will become your manual for running the company. Keep it under review as it will need to change with the company as it grows or procedures change.
If you do not yet have a limited company, they can be incorporated very easily yourself. Just go to Companies House which handles all registrations or we can help you do it.
What are the key terms?
The assumption is that you are 50:50 shareholders in an English limited company and that the company has already been incorporated. The Shareholders Agreement includes the following terms:
- matters requiring both shareholders’ consent are listed
- the process for selling shares in the event of the other shareholder wanting to leave, falling ill or dying is set out with the remaining shareholder being given first refusal
- how to value the departing shareholder’s shares in the event of the above
- how to resolve a deadlock position ( where you both disagree with eachother and can’t move forward)
- terms that prevent eachother from competing with the businesss or sharing confidential information on the business
- preservation of confidentiality
- how to terminate the agreement
PLUS: 30 minutes free advice to help you complete it AND 2 hotline calls @15 minutes each (valid for 6 months from purchase)
