Shareholder agreements need to fulfil a number of functions:
- Cover every likely eventuality
- Clearly set out the rights and responsibilities of shareholders
- Achieve fairness between shareholders
- Preserve goodwill/client or customer relationships
- Preserve continuity of the business in the event of working shareholders leaving or dying
- Reduce the risk of disputes between shareholders arising, or if they do arise prevent escalation so far as possible
Company law is constantly changing. Many changes have an impact on shareholder agreement drafting.
The consequences of not having an adequate shareholder agreement can be severe. Whether it is loose drafting of exit provisions such as valuation provisions or restrictive covenants, or some other failing, inadequate agreements can translate into expensive and distracting disputes, unexpected payments, or loss of key directors and/or clients/customers (and with them loss of turnover). If there is a loophole in your documentation it may well in due course be exploited. If you do not have a shareholder agreement at all you could be exposed to unexpected outcomes in the event of a falling out, or on the death of a shareholder.
Please feel free to telephone me on 020 7100 7766 for a confidential, no-obligation discussion of your situation, or email me.