Shareholder Agreements

Drafting up Shareholders agreement is a specialist service which we are able to provide for our clients.  It involves very careful consideration of the Company's existing constitution (unless it is a new business) as well as your own aims and objectives.  Shareholder agreements are about what two or more persons agree between them in relation to the running of the company and its aims and policies for the future.  Shareholders agreements should be drawn up at the same time as looking at with a view to changing the company's articles of association.

Comparison of Shareholders Agreements with Partnerships

Many of the things to be considered in a shareholders agreement are similar to the matters to be considered for a partnership agreement.   However, there are a number of differences as well.  Shareholder agreements are similar to partnership agreements in that their purpose is to regularise the legal relationship that exists between the people who are in business together.   Whereas with a partnership, a real legal partnership must exist, a 'partnership in a company' does depend on people coming together with a common view of profit. 

The features in a corporate set up and a partnership which make shareholders agreements and partnership agreements different in complexity and nature can be summarised as follows

(1)    A company is a separate person in law and can not be brought to an end by a person involved simply terminating it on his own.  Another consequence of that is that a shareholder can be an employee of a company.  A partner generally has no employment law rights.
(2)    Power and control in a partnership is exercised simply by decisions of the partners.  Decision-making in a company is split between the decisions of the board of directors and those of the shareholders in meetings of the company.
(3)    Shares in a company can be bought, sold or given unless the partnership constitution restricts it..  A partnership share can not be sold or given without agreement of all the partners.  It is possible for a partnership agreement to reflect what happens to a partnership share if there is a death or retirement of a partner. 
(4)   A person involved in  a company can take income in more than one way.  They can take either remuneration as an employee (usually as a director) or by dividend as a shareholder.
 

Related topics

Partnership
Buying a business