Shareholders’ Agreement & Company Documents – what is it?
This service provides the essential documents that every limited company needs. We provide for you:
- a company law checklist which explains the documents you need and the things that you must do
- a shareholder’s agreement – the written agreement between everyone who own shares in a company
- a Director’s Service Agreement – a written employment contract between the director and the company
What’s a Company Law Checklist?
You need this law checklist to help you run your company. It explains
- what you need to do
- what documents you must use and why you need them
Why do I need a Shareholders’ Agreement?
You need a Shareholders’ Agreement to protect both your shares and your company. It helps make a company more stable and profitable and avoid problems which could close the company down.
Every company has:
- Shareholders who own shares in the company. They have invested in the company. The law gives shareholders some rights but often not enough to fully protect their investment.
- Directors who are responsible for running the company. Company law means that directors have duties and responsibilities towards the company.
In a small company directors and shareholders are often the same people. Problems also occur when you can’t agree on something important, like issuing new shares.
A Shareholders’ Agreement makes it easier to run a company. You can agree important things like
- Making important decisions about how the company should be run (for example, limit the amount that the Company can borrow or decide who can fire a director).
- When and how the company can issue and sell more shares.
- What will happen if you can’t agree on something.
What’s in the Shareholders’ Agreement?
Our agreement is drafted on your instructions and we discuss with you things you might not have considered. Some ideas are included below but remember your agreement is designed and drafted for your unique circumstances.
- Things that you want your shareholders to agree on. For example, limiting the company taking out loans.
- What happens if the shareholders can’t agree on decisions (called “Deadlock”).
- Rights of shareholders who only own a small number of shares (minority shareholding).
- The process if a shareholder wants to sell or dispose of their shares. For example, you can make sure that the other existing shareholders get first refusal (called “Pre-emption”).
- What happens if a shareholder gets ill or incapacitated? Do you, for example, want the other shareholders to be able to buy the incapacitated shareholder’s shares? If so, do you want shareholders to have Shareholder Protection Insurance to cover this (cross option).
- If or when majority shareholders can make other shareholder sell their shares because the majority want to “sell the company” (called “Drag-along”).
Why do we need a Director’s Service Agreement?
Firstly, as an employer, a company must give the director important information about their employment. Both the company and the director to understand and agree the director’s role.
Secondly, having a written agreement makes this much easier and clearer. It means you can explain important information
- Basic information – like the director’s hours of work, salary
- What’s expected from the director – their duties and responsibilities
- Arrangements for things like sickness and holidays
- What happens if things go wrong – discipline and grievance
- Ending the relationship – including notice periods and payment
- Protecting the company by explaining what a former director can and can’t do once they’ve left
- The Director’s legal responsibilities
- This service provides drafting of two Directors’ Service Agreements – if you require more please email firstname.lastname@example.org for the additional cost information.
How do I use the documents?
(1) The Shareholders’ Agreement and Director’s Service Agreement are written for your business after we take your instructions and offer our consultancy on the best things to include based on what you tell us.
Start by downloading the questionnaire and letting us have some initial information about you and your company. Once you return that to us we will send you a link to schedule an online meeting so that we can discuss your company and take your full instructions.
(2) The company law checklist is a PDF checklist which you can use as you start and manage a company. This comes with a video guide which explains the checklist to you.
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