A Shareholders' Agreement is a legally binding contract between the shareholders of a company. It governs the relationship between the shareholders in order to protect the interests of the individual shareholders as and against each other.
A Shareholders' Agreement is of crucial importance in any company where there is more than one shareholder. It provides a level of protection for the shareholders involved in the company and establish a fair relationship between them.
This Shareholders' Agreement - Protection Minority Shareholders template is specifically drafted for companies where there are majority and minority shareholders and, either new shareholders are joining the company, or the existing shareholders wish to change the terms of their relationship with one another as shareholders in the company.
This Agreement is designed to protect the interests of the Minority Shareholders (i.e. any person(s) with less than 50% of the issued share capital in the company) against a majority shareholder using its voting power to the detriment of the minority shareholders. It contains specific clauses for the protection of the Minority Shareholders. Without such an agreement, a company is under the control of those who hold a majority of the votes at a directors’ or shareholders’ meeting. Unless constrained by a Shareholders' Agreement, shareholders with a simple majority of votes have very wide powers under Company Law. This Shareholders' Agreement constrains these powers so that certain actions can only be taken with the consent of all the parties.
This Shareholders' Agreement - Protection Minority Shareholders sets-out the rights and obligations of the shareholders, regulates the appointment of directors, as well as how decisions are made by the directors. Please note that under Company law being a shareholder does not confer the right to be a director so a provision in this regard has been included in this Shareholders' Agreement.
This comprehensive Shareholders' Agreement also includes clauses dealing with the transfer of shares in the company, pre-emption rights on a transfer of shares where any party to the shareholder agreement who subsequently wishes to sell their shares must first offer the shares to the other shareholders, and it also includes a Tag-Along Clause. Finally, a Confidentiality Clause and a Non-Compete, Non-Solicitation and Non-Poaching Clause have also been included in the agreement to safeguard the interests of the company.
This Shareholders' Agreement is fully compliant with the changes introduced by the Companies Act 2006.
Please note that the company has not been included as a party to this Shareholders' Agreement because there may be some legal problems if the company is included as a party to the agreement. This is because a company cannot enter into an agreement not to exercise its statutory powers under the Companies Act or its Articles of Association and many of the restrictions in the Shareholders' Agreement, if applied to the company, would have the effect of fettering its statutory powers. However, the company itself can be a party to the agreement if the Articles of Association have been entrenched in accordance with Section 22(1) of the Companies Act 2006.