A Shareholders Agreement describes how the company should be operated and outlines shareholders' rights and obligations.
Word Document (.docx)
Ready to use legal template
Drafted by experienced lawyers
Compliant with Filipino law
Ready to use legal template
Drafted by lawyers
Compliant with Filipino law
The Shareholders’ Agreement, an extra-statutory document as significant as the articles of organization, is used to arrange the administration of a company or the relationships between the shareholders who signed the agreement. This document is suggested inside limited businesses, despite the fact that it is not required and has a negative reputation due to its anonymity. As a potential entrepreneur, shareholder, or firm management, creating such a contract might be a critical step. Download Themis Partner’s model, which may be customized to meet your needs, or contact our specialist attorneys for assistance. If you need to, do not hesitate to consult our other agreement templates, such as Partnership Agreement or Share Purchase Agreement.
A company’s shareholders may opt to sign another legal document, the Shareholders’ Agreement, in addition to the articles of organization. This “extra-statutory” agreement establishes specific regulations governing the operation of the firm and shareholder relations. The articles of association and the Shareholders’ Agreement are therefore two distinct documents that should not be confused: the articles of association constitute the company’s foundation instrument, while the agreement completes and modifies its operation.
It is common to hear the words “Partnership Agreement” and “Shareholders’ Agreement” used interchangeably. The distinction between these two agreements is based on the legal structure of the organization in question. A shareholders’ agreement is used in joint stock businesses such as public limited companies or simplified joint stock companies. Domestic corporation, civil companies, and other partnerships, on the other hand, are referred to as partners’ agreements.
Shareholders’ Agreements are frequently employed as a safety and to protect shareholders, because they may specify what happens if ‘things go wrong.’ The lack of this agreement greement increases the possibility of shareholder disputes and disagreements.
This agreements include clauses that anticipate issues and outline suitable ways to resolve them. Too frequently, people form businesses with friends and family and do not think about preserving their interests until it is too late.
The following are reasons why it is critical to invest time and money in obtaining a Shareholders’ Agreement :
It is impossible to see the company partners falling out or having problems making choices at the outset of a fresh business engagement. Disagreements do arise, unfortunately. It is simpler to formalize and codify the method that should be taken if the relationship goes sour from the start.
The board of directors is normally in charge of the company’s operations. However, shareholders may argue that some decisions should not be left completely to the discretion of the directors and should instead be subject to shareholder approval. This is especially true if the directors are not stockholders. Borrowing or incurring capital expenditure in excess of a specific amount, for example.
This Agreement can safeguard minority shareholders by, for example, prohibiting the issuance of additional shares without majority authorization, which would otherwise erode their stake. The agreement may also include “tag-along” clauses, which allow a minority shareholder to “tag on” to a majority shareholder in the event of a share sale.
This agreement may also safeguard majority shareholders. “Drag along” provisions are typically used when an offer to purchase all of the shares in a firm is received and the majority shareholders desire to accept the offer. The rights enable the majority to compel the other shareholders to accept the offer on the same conditions. Without it, the buyer may back out.
If a shareholder wishes to leave the firm, the remaining shareholders frequently want for limits on current shareholders’ capacity to start or work in a competitive business. These limits can be harsher than those in any Employment Contract and can be extremely beneficial in preserving the company’s interests in the future.
This document may indicate stability for your firm by demonstrating that you have planned ahead of time so that any issue can be resolved easily and quickly. This is very crucial for banks and other creditors who may be interested in investing in your firm.
