“We encourage you to seek legal advice before going into business with your co-owners. This will help to reduce the potential for disagreements or have in place a mechanism for dealing with disagreements without the need for expensive, stressful and risky court proceedings.”
– Kush Birdi
Why (or when) someone would need this service?
A well-drafted shareholders’ agreement will identify the objectives of the shareholders and agree how control should be exercised within the company. It will also be designed to “deal with the unexpected”.
We will advise you in relation to these and other issues surrounding the relationship between shareholders such as:
- Transfer of shares: requiring the shareholders to offer their shares to existing shareholders, pro rata their holdings, before they can be transferred or sold to anyone else, or in any other proportions.
- Termination of the employment or directorship of a shareholder: some agreements provide for ‘bad leaver’ or ‘early leaver’ provisions under which shares may be transferred back to the company by the outgoing shareholder at a reduced value.
- Death of a shareholder: usually his or her shares will pass under their will or on intestacy. Some agreements contain option agreements to enable or require the continuing shareholders to buy the shares from the deceased shareholder’s estate.
- Bankruptcy of a shareholder: his or her shares will form part of the bankrupt’s estate. The trustee in bankruptcy will want to sell these shares for the benefit of the creditors. The shareholders’ agreement may contain provisions to deal with this.
- Dispute resolution provisions: these will require the parties to try to resolve any disagreements by way of negotiation or mediation (or other form of alternative dispute resolution) before legal proceedings can be initiated.
How does the process work and what are the steps?
Usually we provide a questionnaire to get the shareholders thinking about how they wish to regulate their relationship. We would decide at an early stage whether we can represent all the shareholders or whether some may need to seek independent advice due to any perceived conflict of interest.
We would either produce a draft agreement or comment on a draft agreement produced by the other party’s solicitors to ensure that it meets the requirements.
How long does it take?
This depends upon the complexity of the arrangements but generally we would hope that it could be dealt with within four weeks.
Why are Grant Saw the best people for the job?
Our lawyers are highly competent in company law. We are familiar with simple and complex shareholder arrangements and can suggest a broad range of contractual ways to regulate your business relationship. We also understand the most common ways that disputes between shareholders arise and we seek to draft shareholders’ agreements with a view to reducing the potential for those scenarios arising in your business.
With these tools at our disposal, you can enter into business with the confidence that your rights and obligations are fairly balanced with your co-shareholders (even if you own a minority share).
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