Shareholders' agreement - Example - Shareholder's Rights

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Shareholders' agreement - Example - Shareholder's Rights

Shareholders’ agreement - Example

We set out below an example of a shareholders’ agreement between three shareholders in a simple

private limited company. This is only an example agreement and should not be used as a template for

an agreement without consulting us first as it may be missing certain essential provisions.

THIS SHAREHOLDERS’ AGREEMENT is made on [ ] 2010

BETWEEN

(1) Mr. A of 22 St John Street, Manchester, M3 4EB (“Shareholder A”); and

(2) Mrs B of 22 St John Street, Manchester, M3 4EB (“Shareholder B”); and

(3) Miss C of 22 St John Street, Manchester, M3 4EB (“Shareholder C”)

WHEREAS

(A)

(B)

(C)

Societas (UK) Limited (“Company”) is a private company limited by shares incorporated and

registered in England and Wales with company number 12345678 whose registered office is

at 22 St John Street, Manchester, M3 4EB. The Company has an authorised share capital of

£1,000, divided into 1,000 ordinary shares of each, all of which are issued and fully paid

Each Shareholder is the registered owner of the following ordinary shares of £1 each in the

Company, for which each Shareholder has paid consideration at par value:

Mr A 250

Mrs B 250

Miss C 500

The Shareholders have agreed to enter into this Agreement for the purpose of controlling their

capacity as shareholders of the Company

NOW IT IS AGREED that:

1. DEFINITIONS AND INTERPRETATION

1.1 DEFINITIONS

The definitions and rules of interpretation in this clause apply in this Agreement

“Auditors”

the auditors of the Company from time to time;

“Business Day”

a day (other than a Saturday or Sunday) when

banks in the City of London are open for

business; and

“Shareholder”

any of Shareholders A, B and C as the context

requires, and “Shareholders” means all of them

together

1.2 Clause and Schedule Headings

Clause and schedule headings do not affect the interpretation of this Agreement

1.3 Reference to “Persons”

A “person” includes a natural person, a corporate or unincorporated body (whether or not

having a separate legal personality)

8619882v1/SHARED - LAYTONS

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1.4 Reference to Laws

A reference to a particular law is a reference to it as it is in force from time to time taking

account of any amendment, extension, application or re-enactment, and includes any

subordinate legislation from time to time in force made under it

1.5 References to Documents “in Agreed Form”

Documents in “agreed form” are documents in the form agreed by the parties and initialled by

them for identification

1.6 References to the Singular and Plural

Words in the singular include the plural and in the plural include the singular

2. BUSINESS OF THE COMPANY

The Shareholders shall, for as long as they hold shares in the capital of the Company, procure

(so far as is possible in the exercise of their rights and powers) that the business of the

Company is carried on in accordance with the objects in the memorandum of association as

adopted by the Company for the time being

3. MATTERS REQUIRING CONSENT OF THE SHAREHOLDERS

The Shareholders shall, for as long as they hold shares in the capital of the Company, procure

(so far as is possible in the exercise of their rights and powers) that the Company shall not

without the prior written consent of all Shareholders:

• cease to be a private company or change the nature of its business from the type of

business conducted on or prior to the date of this Agreement

• amend its articles of association or the objects contained in its memorandum of

association

• change the name of the Company

• sell or otherwise dispose of the whole or any part of its undertaking, property, assets or

any subsidiary, or any interest therein or contract to do so whether or not for valuable

consideration

• alter any rights attaching to any class of share in the capital of the Company, or create

any option or right to acquire any shares in the capital of the Company

• conduct its business otherwise than in the ordinary course of business on an arm’s

length basis

• do, permit or suffer to be done any act or thing whereby the Company may be woundup,

or enter into any compromise or arrangement under the Insolvency Act 1986

• merge or amalgamate with any other company or undertaking, or acquire directly or

indirectly any interest in any shares or other security convertible into shares of any

other company, or form or acquire any subsidiary

• purchase, lease or otherwise acquire assets or any interests therein which exceed the

value of £1,000

• enter into any contract, transaction or arrangement of a value exceeding £1,000

• effect any increase, reduction, sub-division, cancellation, purchase or redemption of

the capital or any allotment or issue of shares of the Company

• borrow any money in excess of any limits agreed between the Shareholders, or create

any mortgage, debenture, pledge, lien or other encumbrances over the undertaking or

assets of the Company, or factor, assign, discount or otherwise dispose of any book

debts or other debts of the Company

• give any guarantee, make any payment or incur any obligation or act as surety

otherwise than in connection with the Company’s ordinary business for the time being

• lend or agree to lend, grant any credit or make any advance to any person otherwise

than in the ordinary course of the business of the Company

• remove any director appointed by a Shareholder

• pass any resolution or engage in any other matter which represents a substantial

change in the nature of the business of the Company or in the manner in which the

business is conducted

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4. DIRECTORSHIPS

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• hold any meeting of the shareholders or purport to transact any business at such

meeting, unless authorised representatives or proxies are present for each of the

Shareholders

If a Shareholder sells or disposes of all or part of his shares in the Company so that the

aggregate nominal value of his holding of shares falls below 25% in nominal value of the

issued ordinary share capital of the Company, he shall immediately resign any office and

employment with the Company without claim for compensation

5. TERMINATION

5.1 Termination Events

This Agreement terminates immediately upon the occurrence of any of the following events:

• a resolution is passed for the winding up of the Company

• a receiver, administrator or administrative receiver is appointed over the whole or any

part of the assets of the Company or the affairs, business and property of the

Company is to be managed by a supervisor under any arrangement made with the

creditors of the Company.

5.2 Prior Rights

Termination of this Agreement shall be without prejudice to the rights of any Shareholder

accrued prior to such termination, or under any provision which is expressly stated not to be

affected by such termination including in respect of any prior breach of this Agreement

5.3 Consequences of Termination

On a winding-up, the Shareholders shall endeavour to agree a suitable basis for dealing with

the interests and assets of the Company and shall endeavour to ensure that:

• all existing contracts of the Company are performed so far as resources permit

• no new contractual obligations are entered into by the Company

• the Company is wound up as soon as practicable

6. STATUS OF THIS AGREEMENT AND THE PARTIES’ OBLIGATIONS

6.1 Parties’ Obligations

Each Shareholder shall exercise all voting rights and other powers of control available to him

in relation to the Company so as to procure (so far as each is respectively able by the exercise

of such rights and powers) that, at all times during the term of this Agreement, the provisions

of this Agreement are duly and promptly observed and given full force and effect according to

its spirit and intention

6.2 Status of this Agreement

If any provisions of the memorandum or articles of association of the Company at any time

conflict with any provisions of this Agreement, this Agreement shall prevail and the

Shareholders shall, whenever necessary, exercise all voting and other rights and powers

available to them to procure the amendment, waiver or suspension of the relevant provision of

the memorandum or articles of association to the extent necessary to permit the Company

and its affairs to be administered as provided in this Agreement

7. NO PARTNERSHIP

The Shareholders are not in partnership with each other, nor are they agents of each other

8. CONFIDENTIALITY

Each Shareholder undertakes that he shall not at any time after the date of this Agreement

use, divulge or communicate to any person (except to his professional representatives or

advisers or as may be required by law or any legal or regulatory authority) any confidential

information concerning the terms of this Agreement, the business or affairs of the other

Shareholders or the Company which may have (or may in future) come to his knowledge, and

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9. NOTICES

9.1 Notice

each of the Shareholders shall use his reasonable endeavours to prevent the publication or

disclosure of any confidential information concerning such matters

Any notice given under this Agreement shall be in writing and shall be delivered by hand,

transmitted by fax, or sent by pre-paid first class post or recorded delivery post to the address

of the party as set out in clause 9.2, or to such other address notified to the other parties. A

notice delivered by hand is deemed to have been received when delivered (or if delivery is not

in business hours, 9.00 am on the first Business Day following delivery). A correctly addressed

notice sent by pre-paid first class post or recorded delivery post shall be deemed to have been

received at the time at which it would have been delivered in the normal course of post. A

notice sent by fax to the fax number of the relevant party shall be deemed to have been

received at the time of transmission

9.2 Addresses for Service of Notices

The addresses for service of notice are:

Shareholder A

Address: 22 St John Street

Fax number: 0161 834 6862

For the attention of: Mr A

Shareholder B

Address: 22 St John Street

Fax number: 0161 834 6862

For the attention of: Mrs B

Shareholder C

10. SEVERANCE

10.1 Severance (1)

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Address: 22 St John Street

Fax number: 0161 834 6862

For the attention of: Miss C

If any provision (or part of a provision) of this Agreement is found by any court or

administrative body of competent jurisdiction to be invalid, unenforceable or illegal, the other

provisions shall remain in force

10.2 Severance (2)

If any invalid, unenforceable or illegal provision would be valid, enforceable and legal if some

part of it were deleted, the provision shall apply with whatever modification is necessary to

give effect to the commercial intention of the parties

11. COSTS AND EXPENSES

Each Shareholder shall pay the costs relating to the negotiation, preparation, execution and

implementation by him of this Agreement in the same proportion to which he holds shares in

the Company.

12. GOVERNING LAW AND JURISDICTION

12.1 Governing Law

This Agreement and any disputes or claims arising out of or in connection with its subject

matter are governed by and construed in accordance with the laws of England

12.2 Jurisdiction

The parties irrevocably agree that the courts of England have exclusive jurisdiction to settle

any dispute or claim that arises out of or in connection with this Agreement

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AS WITNESS the hands of the parties or their duly authorised representatives the date first above

written

Signed by Mr A ....................

Signed by Mrs B ....................

Signed by Miss C ....................

Author: Paul Caddy (paul.caddy@laytons.com)

March 2010

8619882v1/SHARED - LAYTONS

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