A shareholders agreement is a vital element of any arrangement that involves bringing shareholders into a business. As a legal document that outlines the rights, responsibilities and obligations of shareholders and the company, it is a mutually beneficial agreement protecting the business and the shareholders. It sets out the rules regarding the control of important decisions by the shareholders, the transfer of shares, non-compete obligations, confidentiality clauses and dispute resolution. At JPP Law we only provide bespoke shareholders agreements, but we understand why startups opt for the cheaper solution of a shareholders agreement template. In our view a good template,…

Creating the right shareholders agreement for a company isn’t straightforward. No two agreements are exactly the same. Understandably, some boot strapping startups will try to save money by creating their own shareholders agreement using a template, but this can be a false economy. Every business is different and is exposed to a different set of risks, so it’s important to have a bespoke agreement developed and put in place from the outset. Every shareholders agreement needs to be developed according to the needs of the company and its shareholders and neglecting to put one in place can have seriously damaging…

If you are planning to appoint a new director to work in your business who will also acquire shares in your company then, as well as drawing up a service level agreement to govern their employment, you will also need to consider whether you need to make any changes to your current shareholder agreement.

Becoming a minority shareholder or investor in a business may lead you to believe that, given the limited rights you will have, there are not many important considerations to take into account. However, even a minority investor needs to protect their interests as much as possible and to be able to share or exit its investment in a fair manner. While minority shareholders may not usually benefit from voting rights, it is important to ensure they have access to drag along or tag along rights which provide them with a fair exit. All investors need to know what their rights…

Acquiring part of a business through the purchase of shares is one way to secure an investment. You may be contemplating a partial investment or an outright purchase of a business, either way the same considerations apply. Careful analysis of the target business is critical as there are a combination of commercial and personal factors which one needs to be aware of when investing via shares. It’s also essential to ensure the correct documentation is completed. Our advice is to research, review and risk assess. If you are in need of legal advice for a Shareholders Agreement book a free…

Could a business angel be the answer to your startup business prayers?  Early-stage businesses are generally in need of funding to bring an idea to market but sometimes funding alone is not enough to help them thrive, especially when expertise is critical to success. A business angel could be a good solution to explore and consider because they can provide both expertise and finance.   What is a business angel?  Probably the most known business angels are those that sit in the BBC’s Dragons Den. A business angel is generally a high-net-worth individual who manages a portfolio of investments made…

The Commercial Team at JPP Law outline the reasons why every company should have a shareholders agreement.

To ensure your interests and your business are protected you need an experienced team advising you so the final terms are both fair and workable in the long term. If you are considering a funding round, congratulations! It’s an incredible achievement to build a business that is worthy of external investment. That said, if this is new territory for you, it’s highly recommended to seek professional support, including lawyers and accountants, to guide you through the process. Thinking about a Funding Round? The type of investor you want to attract will be astute and experienced. To ensure your interests and…

Thinking about these questions and being able to answer them will get you a long way to creating your shareholders agreement:  If you are in need of legal advice for a Shareholders Agreement book a free introductory call. Who has shares and what kind?  Who are or will be the shareholders? Are all the shares the same or are there classes of shares with different rights? Perhaps some shares have votes and some don’t? Who are or will be the directors? The directors run the company and shareholders do not usually have a say in the day-to-day running of the…

The shareholders agreement is often one of those documents that startups sometimes forgo or even 'bootstrap' by cutting and pasting from other documents without taking independent legal advice.