Shareholders’ Agreements


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An introduction to the concepts involved in shareholder agreements and the reasons for their various provisions

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Shareholders’ Agreements

  1. 1. Shareholders’ Agreements Presentation by Dirk Kemp
  2. 2. Topics of Discussion <ul><li>Introduction </li></ul><ul><li>What is a Shareholders’ Agreement </li></ul><ul><li>Why have a Shareholders’ Agreement </li></ul><ul><li>Issues commonly covered in a Shareholders’ Agreement </li></ul><ul><li>How a Shareholders’ Agreement is entered into and maintained – new members; amendments </li></ul><ul><li>Implementation of Shareholders’ Agreement </li></ul>
  3. 3. What is a Shareholders’ Agreement <ul><li>An agreement between </li></ul><ul><li>the shareholders (or members) of the Company (among themselves) and </li></ul><ul><li>the Members and their Company itself </li></ul><ul><li>Governing aspects of their relationship </li></ul><ul><li>not covered in the Memorandum and Articles of Association </li></ul><ul><li>to suit the particular requirements of the Company and its Members / Shareholders </li></ul>
  4. 4. Why have a Shareholders’ Agreement <ul><li>Why do couples enter into Ante-Nuptial Contracts? </li></ul><ul><ul><li>To anticipate possible problems and agree how they will be dealt with, if they arise, especially on death / divorce </li></ul></ul><ul><li>To supplement Articles of Association – easier to amend a Shareholders’ Agreement than the Articles </li></ul><ul><li>To avoid future disputes among the shareholders by </li></ul><ul><ul><li>Defining the relationships between them at the outset </li></ul></ul><ul><ul><li>Anticipating the issues which could cause disputes </li></ul></ul><ul><ul><li>Agreeing acceptable ways of dealing with them </li></ul></ul>
  5. 5. Issues commonly covered in a Shareholders’ Agreement <ul><li>Shareholders, classes of shares and shareholdings </li></ul><ul><li>Directors – especially nomination by shareholders </li></ul><ul><li>Management of the Company – who will be responsible for what </li></ul><ul><li>Funding of the Company </li></ul><ul><ul><li>Shareholders’ Loans (i.e. Loans by the shareholders to the Co.) </li></ul></ul><ul><ul><li>Borrowing powers of the Directors (to borrow in the name of the Co.) </li></ul></ul><ul><li>Transfer of shares </li></ul><ul><ul><li>Restrictions on sale of shares (or Pre-emptive rights to purchase) </li></ul></ul><ul><ul><li>Procedures when a shareholder wishes to sell </li></ul></ul><ul><ul><li>Procedures when an offer is made by a 3 rd party to purchase </li></ul></ul><ul><ul><li>Valuation of shares </li></ul></ul><ul><li>Resolutions (i.e. issues) requiring consent of shareholders </li></ul>
  6. 6. Essential Elements of any Shareholders Agreement <ul><li>Domicilium and Notices </li></ul><ul><li>Provision for variation / amendment of the shareholders’ agreement </li></ul><ul><li>Provision for the Resolution of Disputes </li></ul><ul><ul><li>Usually arbitration </li></ul></ul><ul><li>Cancellation of all prior agreements </li></ul><ul><li>Requirement that all – including new or future – shareholders have to sign the agreement </li></ul>
  7. 7. How a Shareholders’ Agreement is entered into & maintained <ul><li>Discussion and negotiation in advance </li></ul><ul><li>Initial shareholders sign at time of company formation / acquisition </li></ul><ul><li>Subsequent shareholders sign on transfer or issue of shares to them </li></ul><ul><li>Agreement reviewed from time to time and as issues arise </li></ul><ul><li>Amendments agreed, committed to writing and signed - or a fresh amended version signed </li></ul>
  8. 8. Implementation or Application of Shareholders’ Agreement <ul><li>In General Meetings of the Company – when resolutions are passed relating to appointment of Directors </li></ul><ul><li>In Board meetings – when resolutions are adopted relating to: </li></ul><ul><ul><li>Borrowings </li></ul></ul><ul><ul><li>Issue of new shares </li></ul></ul><ul><ul><li>Proposed transfers – arising from offers for sale </li></ul></ul><ul><ul><li>Dividends </li></ul></ul><ul><li>When an offer is made by a third party to purchase the Company </li></ul><ul><li>Other matters covered by the Shareholders’ Agreement </li></ul>