October 26th, 2012 / Insight posted in

Drawing up terms for shareholders

DB writes: I plan to draw up a shareholders´ agreement with my future partner. Is there a template that could be used as a guide for the wording to ensure all pertinent areas are addressed? Also, where I can get professional advice on such an agreement?

The shareholders´ agreement is unique to each company. There are many types because they depend on the relationship between the shareholders. For example, your situation may be effectively one of a partnership agreement as you and your partner may be 50:50 shareholders. Alternatively, your partner may be just supplying the company with finance and may not be taking a management role. You could have clauses that cover the regularity of board meetings and the level of capital spending. Other clauses will be needed to deal with the nature of the shareholder relationship. Professional advisers that have experience of dealing with shareholder agreements will usually have examples of shareholder agreements to show you and you can draw from these if the circumstances allow. The professional adviser has to have the experience to be able to incorporate the requirements in a shareholder agreement in a simple form, so all participants can understand them. As shareholder agreements tend to be completed at the beginning of a relationship and then not read until some years later when a dispute arises, the parties may construe different meanings if the wording is not clear. So ask your professional advisers whether they have the appropriate experience in dealing with shareholder agreements and, if so, ask them to supply you with a list of the issues that you should be considering.