Short Form Shareholders’ Agreement
A shareholders’ agreement is a valuable document for a company to have in place. It dictates the relationship between shareholders, alongside (usually with a degree of overlap) the company’s articles of association. If there is ever a conflict between the two, the shareholders’ agreement will often take precedence.
Unlike the company’s articles, a shareholders’ agreement is a private contract and is not required to be publicly available, which can give the company and shareholders greater flexibility when setting out the terms. A shareholders’ agreement can be used regardless of whether the company is on model articles, Vestd’s articles or other custom articles.
Shareholders’ agreements contain various rights and obligations that apply to shareholders and the company. There can be as many or as few as the parties wish — our example document is a short form agreement and therefore contains few obligations, but gives an example of what may be included. The agreement includes provisions around the process for the issuance and transfer of shares and the obligation to not issue shares to a new shareholder unless they enter into a deed of adherence binding them to the shareholders’ agreement. Other rights that are commonly seen in longer form shareholders’ agreements include pre-emption rights on a new issue or transfer of shares and investor consent matters.
Generally speaking, any future shareholders will be required to sign a deed of adherence which will bind them to the shareholders’ agreement.
For information on longer form shareholders’ agreements, please see here.
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