Where there is more than one shareholder in a small private company, it is recommended that they agree to the terms of a bespoke shareholders’ agreement.

A shareholders’ agreement is a private contract (unlike a company’s Articles) that is drafted to ensure that potentially contentious issues are addressed in advance. It will deal with matters such as shareholders’ rights and obligations, the management of the company, the issue and transfer of shares, dividend policy and dispute resolution mechanisms. While optional, it is an important document that can be relied on should relations between the shareholders break down.

It is understandable that small business owners may be concerned about allocating resources to the costs of putting a shareholders’ agreement in place, but, without one, there is the potential to be exposed to far greater costs should they, for any reason, find they can no longer work with each other. If you are considering whether or not you need a shareholders’ agreement, please contact Anna Hay at our Wells office on 01749 674747.