Small Business

Importance of shareholder agreements

Running a company by yourself is not an easy task. Unless, of course, you are millionaire or a billionaire. For us, the average working man, it is almost impossible to run a business by ourselves. That is why we have the option of shareholders. When you have shareholders in your company, you have shareholders agreement. Well, if you do not have such an agreement, you need to have one immediately. A shareholders agreement is between the owners of a private company. The main reason why this is so important is because it regulates different aspects of the ownership and all So, why exactly do you need this agreement? Well, the answer lies below. So, continue reading to find out.

Fall outs

 

This might be a negative view point to look at but you need to be practical and real and get ready to face for the possible downfalls. If the shareholders were to fall out it will give rise to many issues. When such problems arise it is hard to adjust to it and react to it. Fortunately, having a greatly drafted shareholders agreement means that you will know exactly what to do when such issues occur. This agreement will include such foreseeable circumstances and how to prevent these conflicts from affecting the business. To see what you need to add to such agreements make sure you take a good look at a great shareholder agreement sample drafted by a professional.

 

Protection

 

Not every ownership in businesses is split into half-half. Shareholdings vary on percentages and therefore the terms given to different shareholders with different percentages will vary. This can give rise to many conflicts and disagreements. In order to protect all shareholders this agreement will bring in the necessary terms. The clauses and the draft needs to be properly put together in order for this to succeed.

Management

 

Shareholders play different roles in a company. But managing the company is not one of them. Despite all the misconceptions shareholders have very limited power when it comes to decision making. The directors are the ones who play this specific role. Now, in some company directors can also be shareholders. Either way, to make sure the rights of the shareholders are not violated this agreement will clearly point out what are the rights of the shareholders and so.

 

These are just a few simple importances of having shareholders agreement for a company. Running a company with several partners is not easy. There will be frequent disagreements and conflicts. In order to prevent the company from getting into trouble due to such conflicts it is always better to have these agreements.

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