A shareholder agreements are a necessity for the owners of any company. They set out the rights of one shareholder against another. Majority and minority owners need a comprehensive agreement to protect their interests, their equity, and possibly their debt investment.
Our agreements do just that, covering a large range of matters, simply and logically.
An agreement between the owners of a new company in any industry.
The template is drawn on 20 years of practical experience and includes all the options and explanations you need to enable you to craft the exact document you want.
This document provides for the legal and management issues that established companies face. It helps you to protect your rights against other shareholders and directors, prevents disputes, and clarifies the separate roles of stakeholders within the business.
This template is for a company that is the vehicle for a joint venture operated by two or more parties. The shareholders in the project could be two or more individuals or companies, whilst the venture could be any business, from a property renovation to the design and manufacture of an item that requires the specialist expertise and skills of all partners. Use for a project that has a purpose and structure over a short time scale.
Includes the provisions that a large professional or institutional investor such as a business angel, venture capital or private equity investor would require to protect their investment.
It also considers the provisions of minority shareholders, who by virtue of the circumstances are likely to be the founders and friends and family of the founders.
Additional features to other documents include:
An agreement where each shareholder is the owner of his or her own leasehold property within a building or scheme that is managed by the company.
It provides clear and practical routes through the contentious areas of who controls what, and leaves the owners with an arrangement that maximises efficient, democratic management of the communal areas of their property.
If the document isn’t right for your circumstances for any reason, just tell us and we’ll refund you in full immediately.
We avoid legal terminology unless necessary. Plain English makes our documents easy to understand, easy to edit and more likely to be accepted.
You don’t need legal knowledge to use our documents. We explain what to edit and how in the guidance notes included at the end of the document.
Email us with questions about editing your document. Use our Lawyer Assist service if you’d like our legal team to check your document will do as you intend.
Our documents comply with the latest relevant law. Our lawyers regularly review how new law affects each document in our library.
A shareholders agreement is a legally binding, private document that sets out further powers, rights and obligations that the owners have to each other and the company, beyond those that already exist under law or through the constitution of the company.
In New Zealand, the Companies Act 1993 provides the over-arching rules under which all companies must operate including the rights and responsibilities of shareholders.
The company constitution sets out how an individual company is run by the board of directors and the shareholders. This document records how the owners control and manage the business between themselves, providing the basic business structure. Many of the matters covered are procedures, such as how meetings are called, or how an offer to buy shares should be made.
Further to that joint framework of the Companies Act 1993 and a company's constitution, using a shareholders' agreement, there is enormous scope to decide who may do what, and under what circumstances.
Having a shareholders' agreement in place is essential for both majority and minority owners, for a small business or a large one.
The reason why to write one is not one of compliance with the law, but for the protection of your personal interests - even if you are a majority shareholder who owns more than half of the total share capital.
Minority shareholders are likely to want greater control over the decisions that influence the value of their holding than the law gives them by default.
A majority shareholder may wish to make sure that minority shareholders cannot sell their shares easily to anyone who may have different ideas about the direction the company should take, or that a previous employee who left the company as a result of poor behaviour (commonly known as a bad leaver) has no further say in the company.
Executive directors are employees, accountable to the company and its shareholders. Where directors are also stock holders, as is so often the case, a director may be able to make decisions that benefit themselves as a shareholder, but which are not in the interests of their fellow owners.
A shareholders agreement fulfils the role of an operating agreement. It allows you to set the limits of director power, and clarify what matters should be referred to the share holders for a decision. Doing so helps to ensure that owners are kept informed and that the most important decisions are made by them as a group, and not by the directors.
The converse applies too. An agreement can also define what decisions a shareholder-director may take freely, without requiring a members meeting, allowing confident, decisive action when it is needed.
An agreement can also help resolve deadlock in decision making between the owners as shareholders. Without such provisions, it is possible that a situation that is not beneficial for the company or any owner continues indefinitely.
By default, voting power is in proportion to shares held. Your agreement can over-ride this basis, allowing you to specify the rules as to how decisions on subjects important to you are made. Minority shareholders can be given more say on certain issues.
You can go as far as to completely separate ownership and control: useful if some shareholders may not have experience or knowledge of running the company to allow them to make effective decisions. For family businesses and companies where some shareholders hold shares only as an investment, this ability to separate ownership from governance is likely to be a useful feature.
Having a written shareholders agreement in place can help prevent other owners from reducing the value of your investment by their actions. It can do this by setting out:
Some aspects of management can be recorded in the company's constitution. However, your shareholders agreement is a private document that you don't have to file with the Companies Office or make publicly available.
Only you and the other owners will know the arrangements you have. How your company is managed therefore remains confidential. By including confidentiality provisions, you can further control sensitive information.
In any company, disputes arise between owners and other stakeholders. They can be expensive to resolve, and disruptive and detrimental to the on-going operation of the business.
Many matters are likely to be discussed at each annual general meeting of the members. Some will require immediate action and therefore will be voted on. Others will come under strategic or contingency planning, such as under what circumstances owners agree to a merger if approached.
The likelihood is that over a period of time, consensus might be forgotten on any single issue if there wasn't a vote.
Discussing these matters at the outset when starting a new business or when a new shareholder arrives and then recording them in writing limits the scope for a single member to scupper the plans of the other stockholders by claiming that they had never been involved in such decisions.
The inclusion of a deadlock clause and a dispute resolution procedure (which could be arbitration or mediation) within each shareholder agreement template makes resolving any that do occur easier.
A shareholders agreement allows you to plan for the worst so as to keep the business going. Within it, you can set out what would happen should certain events occur, whether how you deal the sudden departure of a key founder or the withdrawal of a source of funding.
Writing one, together with the other owners, is a process that allows you collectively to evaluate the risks to each of you. It can help with business planning, especially for a new business.
An owner may have ideas as to when they want to sell their shares and which ones of the remaining shareholders takes over their role. A shareholders agreement can ensure this happens.
The law relating to these documents is both corporate law (principally the Companies Act 1993) and commercial contract law.
Your shareholders agreement is always subject to constitution of your company. If you are putting one in place, it is usually a good time also to review and update your company's constitution to make sure that there are no conflicts between the two documents.
