Are Shareholder Agreements a Waste of Time?

in Uncategorized
Comments are off for this post.
Are Shareholder Agreements A Waste Of Time?
Getting a company incorporated in the UK is easy; the hard part is actually sitting down with your shareholders and drafting a shareholder’s agreement. A shareholders agreement is an important part of the business unit. It outlines the rights and obligations that a shareholder has towards the company and his/her fellow shareholders, and vice versa. Most shareholder agreements are concluded between the company and the shareholders. These, together with the Articles of Association, are the internal set of rules with which the company is governed.
An expense not needed
Naysayers of shareholder agreements believe that this is an agreement that breeds both discontent and drains the company’s finances. In the opinion of such people, getting a lawyer to work with shareholders on a day-to-day basis will cost the company considerable amounts of money. Such expenses cannot be expected off businesses that are in their infancy. In their opinion, the articles of association should be enough of an internal rule guide to run the company.
Is it really an additional expense?
Shareholder agreements, at the end of the day, are imperative for the smooth running of the company. At the end of the day, a business like any other entity and aspect in life can go through tough times where shareholders may start to disagree with another. A shareholder agreement that is clearly defined with the rights and obligations will outline the worth and decision making authority of each shareholder and save the business from unnecessary quarrels.

At the end of the day, shareholder agreements are designed to inculcate harmony in a business. They help shareholders understand the boundaries that they are supposed to stay in and ensure that all parties respect each other’s ambit of power. On top of that, clarity in a business is one of the stand points of success and clearly defined share holder agreements and articles of association are able to do just that.

Share this article