Why shareholder’s agreement is needed by business?
The reasons for keeping a shareholder’s agreement by a company may be –
- Easy management of the company – not only it facilitates the management of the company but also keeps a check on how the management of the company is happening. There are many important decisions regarding the functioning of the company that is taken by the shareholders for the benefit of the company. As the much power is with shareholders, the directors aren’t solely responsible for the mishappenings.
- Power – as mentioned above all the power is not concentrated with the directors hence, even the minority shareholders hold the power to take important decisions of the company. It thus facilitates equal distribution of the power.
- Protects the company from majority shareholders – the majority shareholders sometimes act like the king of the company and as they now have the power to influence the important decisions of the company, they may act unfairly. Thus to oppose this act their role is specifically stated in the shareholder’s agreement to make sure they don’t take the undue advantage of their powers.
- Limits – shareholders have some limits and restrictions. They cannot move away whenever they wish to. Also even if they leave they don’t have the power to join any of your competitors as important information about your company can be transferred to your competitor.
- Safety – as this document contain important and confidential information about the company, this agreement would keep the information safe and secure.
- Selling of shares – sometimes a shareholder may wish to sell his shares to another individual. This act is fine unless he shares are received by a trusted individual. In this case of transferring or selling of shares, other members of the company or other shareholders may restrict this movement and would stop the shares from going in the wrong direction.
- Disputes – in case of disputes, many policies have been written in the agreement on the procedure to solve the dispute.
SHAREHOLDER’S AGREEMENT CONTAINS –
A fraction of share held by an individual, power in the decision making of various shareholders, rules for selling the shares, policy in case of disputes etc.
Shareholder’s agreement has its own benefits and should be definitely created for reaping the benefits of this agreement. Choose Qiklegal as your business partner for the settlement of these documents.