Every company, large or small, is different and there are many ways to structure the shareholding. Smaller companies in particular often don’t consider their structuring apart from the number of shares to be held by shareholders. If there are likely to be competing groups of shareholders who have different interests this can lead to disagreements between them and whoever holds the majority of shares will always be able to out-vote the minority group. This way they effectively control the company.
Having a Shareholders’ Agreement in place is a good way of preventing problems and balancing the interests of majority and minority shareholders. An agreement could set out the procedure to follow in the event of a voting deadlock. It can place restrictions on the right to sell shares thereby protecting other shareholders and preventing shares being sold to someone who may not be the best for the company. The board of directors should also be considered in the agreement. To avoid voting clashes it may be a good idea to create a permanent chairperson who holds the casting vote. Another way is to set out that certain decisions may only be made by the shareholders or a particular director or committee of directors. All of this should be documented in order to avoid problems in the future. It should be agreed how often the director/committee should report to the board so that all directors know what is happening in the company.
"If you feel that your company could benefit from having a Shareholders’ Agreement or you wish to update your current agreement you need to get the paperwork in place. This may consist of amended Articles. We will be happy to advise you on any questions you may have on getting the correct structure for your company," says Commercial Solicitor Karen Edwards.
Our Commercial Team, based in Christchurch, also cover Bournemouth, Poole and the New Forest. For a free initial chat, please call 01202 499255 and Karen or a member of the team will be happy to discuss any questions that you may have.