The importance of professionally drafted shareholders’ agreements for Northern Ireland’s Businesses
4 minute read
A generic shareholders’ agreement could harm your company
The importance of a professionally drafted shareholders’ agreement that has been tailored to your business cannot be overstated. Although a business owner might be tempted to cut costs with a template or “off the shelf” shareholders’ agreement, this can and often does, lead to problems down the line. This is especially the case should relationships between shareholders break down or if a shareholder’s priorities change.
What is a shareholders’ agreement?
A shareholders’ agreement is a contract between shareholders in a business. It obliges them to follow certain procedures, makes clear how the business should operate and secures their rights as a shareholder.
Why a solicitor should draft your shareholders agreement
A quick search on Google will reveal many websites that offer template shareholders’ agreements. They may be free or incur a small fee. However, these templates may not consider the nature of the shareholders’ relationship, the nuance of the company and, in some instances, even the legal jurisdiction that your company operates. Only a professional corporate solicitor can provide you with a shareholders’ agreement that you can rely on to perform its function within your company structure.
Businesses in Belfast & Northern Ireland have complex needs
A solicitor will examine your business and work directly with you to better understand the nature of the shareholders’ relationship. This allows for the creation of a tailored agreement that ensures complete protection for both majority and minority shareholders. It will impose clear restrictions and provide means for dispute resolution should a shareholder wish to leave the business and continue to reap the benefits of owning shares. Finally, it demonstrates business stability and can inspire confidence from various stakeholders, including potential investors.
Professional shareholders’ agreements offer a layer of protection
A professionally drafted agreement might also offer some level of protection in the very rare circumstance that a costly mistake was made. If a professional solicitor made a mistake and you suffered losses, you may be able to make a professional negligence claim. On the contrary, if you drafted a shareholders’ agreement from a template that contained costly errors, your recourse will be limited. Visit Professional Negligence Claims to learn more.
Put simply, every business is different and your complex requirements may not be met by a template. A shareholders’ agreement should be viewed as an asset worth investing in.
What happens if you don’t have a shareholders’ agreement
As established, the shareholders’ agreement outlines the relationship between shareholders. Without one, shareholders and the company rely on articles of association, legislation and common law procedure. This may expose them to the potential of conflict. Furthermore, a shareholders’ agreement is often a requirement of investors and the absence of one might harm your ability to fundraise.
Do you require a shareholders’ agreement for your Belfast & Northern Ireland business?
If you have business interests in a new or existing business and require a shareholders’ agreement, we are available to advise. Contact us for a free exploratory discussion with an experienced corporate solicitor or learn more about our services at Corporate Law.