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The Adventures of Steve McDonald and his Shareholders Agreement

Adrian Anderson (Partner and Head of the Corporate Department)

Poor Steve McDonald, he hasn’t had an easy life.

The famous cobbles have seen him become embroiled in schoolboy pranks, illegal activities, multiple marriages and various failed businesses.

Recently, Steve has had to deal with the breakdown of his relationship with his ex wife and ‘business partner’, Becky, who is hell bent on selling what she believes is her share of the Street Cars taxi company.

However, things are about to get better for Steve thanks to his shareholders agreement.

Where two or more people own a company, it is important that they enter into a shareholders agreement.  A shareholders agreement should have provisions dealing with all of the following.

Lets’ hope Steve has remembered to put them all in.

1. The advancing of money to the company (sometimes called “cash calls”)

2. The role of each shareholder and the amount of time they must spend on company business

3. A prohibition against transferring shares without giving co-shareholders first option

4. “tag” and “drag” rights on shares

5. A procedure to follow if the relationship breaks down

6. Non-competition provisions while agreement carries on and after a shareholder leaves

7. The authority and responsibility of each shareholder including right to sign cheques

8. The business plan of the company

9. Voting arrangements on specified important  issues

10. Giving of personal guarantees

11. Forfeiture of shares – ie confiscation in certain circumstances

12. Retirement and good and bad leaver provisions

In the absence of a shareholder agreement a solicitor would have to rely on a very inadequate statutory and common law set of rules.