A shareholders` pact is a private agreement between shareholders. A company`s statutes are a public document and companies are legally required to comply. The two documents govern the company`s action and may overlap. So they have to make sure they are consistent. This shareholder contract serves to protect the interests of all shareholders of a company. When it comes to starting a business with family or friends, it`s easy to think that nothing can go wrong in the future. You may assume that if you trust yourself, you do not need to enter into a shareholder pact — you might think that asking for a shareholder pact makes you think you don`t trust or respect your new trading partners. The purpose of the shareholders` pact is to clarify some key issues concerning shareholders, such as the rights they have as shareholders. B when they are to be consulted by directors on decisions about the company and the circumstances under which they may transfer their shares to another person. A well-developed shareholder pact should complement your company`s by-law (for more information, please see our guide on the statutes and the creation of its own statutes here). Each agreement will balance different shareholder interests in different ways, including: In addition to describing the characteristics of a shareholder pact, we also have a simple shareholder contract model available for download. If a majority shareholder wants to sell its shares but a minority shareholder is not willing to give its consent, it is important to include a provision that requires that shareholder to sell its shares. This is often referred to as the “Drag Along” provision.
This will then allow the majority shareholder to realize his investment at a time and price that he deems reasonable. Of course, the price and other payments for the sale must be fair to all shareholders, including minority shareholders. Business decisions that require a special agreement are reserved. Instead of the board having the final say, shareholders can reserve decision-making power: prepare for potential shareholder disputes by including dispute resolution clauses that include: the proposed shareholders` pact is one of our most popular products. Since our launch, this model has been used by more than 2,000 UK companies. Some people with a shareholder pact will never have to rely on that, but there will be many more cases where shareholders would like them to have taken the time to reach a formal agreement. In the absence of a formal agreement for conflict resolution plans, shareholders may find it difficult to resolve disputes. For example, our shareholder contract allows shareholders to use a mediator or arbitrator to help them resolve disputes when they arise. A shareholder contract also establishes a statement of the parties` agreement on their obligations that can help resolve disputes.