Digital Marketing Blog

Shareholders Agreements – The Fundamentals (Infographic)

The shareholders’ agreement is one the most important aspect that one should consider when establishing a new business enterprise that involves more than one individual who contributes financially or otherwise. Basically, a shareholders’ agreement provides the exact ownership stake each business partner will enjoy, along with incumbent duties and obligations. Moreover, non-company contents, like management rights, licensing intellectual property, etc. are commonly stipulated in the shareholder’s agreement.

Although a shareholders’ agreement is not mandated by law, it offers many advantages that shareholders can’t simply afford to ignore.

  • It can be used to defend the position of minority shareholders by requiring unanimous approval for important company decisions.
  • It can control the appointment and removal of directors by allowing a shareholder or a group of shareholders each to appoint one or more directors.
  • It can regulate the raising of capital to avoid the dilution of shareholdings.
  • It can place restrictions on changes to the nature of the company’s business.
  • It can provide for the resolution of disputes where a deadlock occurs, through mediation and/or arbitration.
  • It can be tailored to suit the company’s needs. It may set out how the company is structured, the day-to-day operations of the company, how many directors there will be, and the remuneration for the directors.

There are particular provisions that you should look out for when entering a shareholders’ agreement. To know these, here are the key takeaways from the infographic below which details the fundamentals you need to know about shareholders’ agreement.

  1. The business of the company and its management.
  2. Limitations and restrictions on management.
  3. Rights and obligations of shareholders.
  4. Distribution policy.
  5. Covenant regarding the sale of shares in the company.
  6. Covenants regarding the restriction from competing with the company.
  7. Valuation of shares.
  8. Dispute resolution.

Check out the infographic below from Amorys Solicitors to learn more.

Shareholders’-Agreements-The-Fundamentals

Atit Shah

Atit Shah is a Digital Marketing Specialist and founder of Digiblogic. He is a foodie who loves Social Media, e-commerce marketing, traveling and photography. Digital marketing is his true passion and is something he has been obsessed with. Find him on Linkedin.

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