Shareholders’ Agreement & Company Law Pack – what is it?
This pack contains the essential documents that every limited company needs. It contains the following:
- 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.
Why do I need 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.
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 comes with notes and guidance so that you can tailor it to meet the needs of your company. It includes
- 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”).
- 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 I 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.
How do I use the documents?
(1) 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.
(2) The Shareholders’ Agreement and Director’s Service Agreement are an instantly downloadable MS Word documents. They each come with notes and guidance so you can customise them to suit your requirements.
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