On starting a company with more than one shareholder, shareholders are often advised to make a Shareholders' Agreement... why?
While a Shareholders' Agreement is by no means a legal requirement, shareholders are well advised to record their agreement at the outset of business operations in order to regulate the way business between them is conducted.
A Shareholders' Agreement is usually formed at the beginning of a new business venture.
A Shareholders' Agreement is a binding contractual arrangement between shareholders and governs their relationship with one another, their business relationships and arrangements.
Quite often, shareholders will ask whether a Shareholders' Agreement is actually needed particularly when the business is young, relationships are good and finances may be tight.
So, why should shareholders seriously consider entering a Shareholders' Agreement?
Remember: the initial cost in setting-up a Shareholders’ Agreement is nothing compared to the costs of disputes and you should therefore view the cost of preparing a Shareholders’ Agreement as an investment. An investment in the smooth-running and stability of your company.