Do you need a shareholder agreement?

When setting up a company with family or friends it is easy to assume that nothing can go wrong in the future.

You might assume that - as you trust one another - you do not need to put in place something like a shareholders’ agreement. 

In fact, you might think that asking for a shareholders’ agreement will make it sound like you don’t trust or respect your new business partners.

Hopefully, nothing will go wrong in the future – after all, nobody sets out expecting it to! However, even family members and best friends fall out and, unforeseen circumstances can occur.

If the worst should happen, you could then end up with nothing. Or you might face the breakdown of a friendship alongside a costly and acrimonious legal dispute related to the business.

Why do you need a shareholders’ agreement?

Although the company’s articles of association will help to some extent, a fully considered and well drafted shareholders’ agreement can act as a safeguard and give you and your fellow shareholders more protection against these types of scenario.

Although some people with a shareholders’ agreement will never need to rely on its terms, there will be many more cases where shareholders wish they had taken the time to put a proper agreement in place.

If you are going into business with others and are looking for confidence about your future relationships with them, you should carefully consider putting a shareholders’ agreement in place to protect both the business enterprise and your own investment in the company.

Our next blog will explain what a shareholder agreement is – in the meantime, if you have any queries or would like to discuss your situation in more detail, request a free of charge call back from our website or click here and we will contact you by return.