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Shareholders' Agreement: Why Have One?

They offer a lot of protection ...

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Posted by Roger Eddowes on 25/11/2021 @ 8:00AM

A limited company shareholders' agreement is the equivalent of a partnership agreement. If more than one shareholder is part of a company, these agreements are very useful ...

 I always recommend a shareholders' agreement if you're thinking of going into business with someone else!

I always recommend a shareholders' agreement if you're thinking of going into business with someone else!

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They regulate the way the business is run, deal with any disputes or unexpected challenges, and provide protection for an individual's investment.

"Shareholder agreements establish fair relationships!"

There is no law saying you have to have a shareholders' agreement as there's no filing requirement via Companies House. Still, I highly recommend them if you're in business with other people.

They have many advantages, including:

  • preventing shareholders falling out

  • regulating the management of the company

  • offering protection for both the majority and minority shareholders

  • controlling the transfer of shares

  • potentially linking shareholdings to employment

  • applying restrictions on the exit of a shareholder resolving disputes

  • demonstrating business stability

  • offering the mechanism for a varied dividend policy

Any business owner could encounter issues like these, so I always recommend them if you're thinking of going into business with someone else and choosing a limited company structure.

"The same applies if you're bringing another shareholder onboard!"

I strongly believe all the shareholders should review them regularly to ensure everyone is working according to the agreed shareholders' agreement and make adjustments if needed.

Until next time ...

ROGER EDDOWES
Business Godparent

 
 



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About Roger Eddowes ...

 

Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.

Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.