Shareholders Agreements

Kevin Rye, 27/04/2020

Shareholders Agreements

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Key Insights

  1. Shareholders agreements are different from a Memorandum of Understanding, which isn’t a legally enforceable contract
  2. They can be useful if you’re seeking to create certainty and clarity for shareholders

Shareholders’ agreements can exist between all shareholders, or only some – for example, the holders of a particular class of share.

They exist to protect the shareholders’ investment in the company, and establish a fair relationship between the shareholders, and governs how the company is run.

The agreement will typically set out the shareholders’ rights and obligations; regulate the sale of shares in the company, describe how the company is going to be run; provide an element of protection for minority shareholders in the company; and define how important decisions are to be made. This can be beneficial both to minority and majority shareholders.

They are particularly useful in determining relationships between supporters’ trusts, who often hold shares in the club, and the other shareholders, especially in terms of additional rights and responsibilities if they hold a directorship. Swansea City and Carlisle United both use them.

A shareholder agreement is a legally binding document, and you might prefer to have the flexibility of a Memorandum of Understanding (MOU).

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