When a business is owned by a company, conflict between shareholders can seriously interfere with the operation of the business, it can devalue the business and in some worst-case scenarios lead to the business’s ultimate demise.
It is always advisable to have a Shareholders’ Agreement from the outset.
A Shareholders’ Agreement can cover a myriad of ownership, management, and succession issues.
Whilst no two Shareholders’ Agreements are the same, it is recommended that they at least cover matters such as how to deal with conflict in the event the parties reach an impasse over any issue. There should be compulsory dispute resolution processes set out in the Agreement, so everybody knows exactly what they must do to resolve such disputes.
It should also cover what should happen in the event the dispute cannot be resolved.
It should cover how decisions are ultimately made in relation to expenditure, capital acquisitions over a certain value, salary drawings and any other financial decisions of significance.