Plan ahead with a Shareholders Agreement
Planning for the unexpected
From exits to emergencies, ensure your business is covered. Book your FREE 15-minute consultation to assess your shareholders' agreement needs.
What is a Shareholder's Agreement?
A Shareholder’s Agreement (often called a Buy-Sell Agreement) is a crucial document for shareholders or partners, separate from a company's Constitution or a partnership deed. This agreement outlines the terms and conditions regarding your interest in the business under various circumstances:
1. In the Event of Death, Total Permanent Disability or Trauma
The agreement specifies how your interest in the business can be converted into cash for your family if you pass away or suffer a total permanent disability. This ensures financial security for your loved ones during difficult times.
2. If a Co-Shareholder or Business Partner Becomes Incapacitated or Dies
The agreement addresses the potential scenarios where a co-shareholder or partner can no longer contribute to the business due to incapacity or death. It clarifies whether you will be required to work with someone who is unable to fulfill their role or with their spouse (the inheritor under their Will). Additionally, it outlines whether you can compel the deceased or incapacitated partner to sell their shares and, if so, at what price.
3. Exiting the Company
Should you decide to leave the company, the agreement provides a structured process for doing so, ensuring that you can retire or exit at a fair price without facing unnecessary obstacles.
4. Shareholder Expectations Regarding Spousal Agreements
The agreement outlines expectations for shareholders to enter into agreements with their spouses or partners regarding shareholdings in the event of a separation. Specifically, it may require shareholders to establish a property relationship agreement with their spouse, ensuring that in the case of a separation, the business shares remain with the active shareholder, while the spouse is entitled only to other assets.
5. Insurance Provisions
The agreement details which key personnel hold insurance, the specifics of the coverage, and the beneficiaries of the insurance payouts in the event of death or incapacity. This ensures that the business is financially protected and can continue to operate smoothly.
6. Dispute
The agreement details will hold the process that the shareholders and business owners must follow in the event of a dispute or disagreement between the parties. It is important because where there is disagreeance or conflict, this will also filter down towards your staff and business operations, so it is important to be in agreeance on the process of resolving the conflict when you are in disagreeance.
By addressing these key elements, a Shareholder’s Agreement helps create clarity and security for all parties involved, ensuring that the interests of shareholders and their families are adequately protected.
From here, book a FREE 30-minute consultation here with one of our team, who can discuss whether a Shareholder's Agreement is right for you.
Unsure if you need a shareholders' agreement?
Book a FREE 15-minute consultation with one of our team, who can discuss whether a Shareholder's Agreement is right for you.
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