Lawyers in South Auckland– Shareholder Agreement – An Example Of Their Work

A shareholder agreement is not the first document people think about when considering any of the lawyers in south Auckland, yet they are essential documents for any business. Below we examine a few reasons why they are so important.

What Is A Shareholder Agreement?

A shareholder agreement sets out the terms and conditions for the way shareholders interact with each other. This can cover the ownership and transfer of shares, the operational structure of the business, dispute resolution, how shareholders can exit the business, and how to handle the sale of the enterprise.

Why Have One?

At the start of a business all the shareholders are on friendly terms. Often a dispute will arise. Other times, one of the directors might want to exit the business so what happens to their shares? If a director gets divorced, how are the shares handled in a divorce settlement? What if the former spouse ends up owning the shares? Would they have a role in the running of the business?

These are difficult questions to answer, especially if there is any animosity or just plain old emotions involved.

A shareholder agreement will detail these situations from the outset when everyone is on friendly terms.

What Is Included?

A shareholder agreement is a binding legal document so it needs to be written by one of the lawyers in south Auckland to ensure that it is legally correct. A good shareholder agreement will contain details and processes about the following:

• Transfer of Shares: If a shareholder wants or needs to sell their shares, to whom can they sell them? An outsider? One of the other shareholders? How does that affect voting numbers? This needs to be clearly explained from the start to avoid any misunderstanding at a later date.
• Voting Rights and Management: This concerns who can become a director and what roles they can have. What are the responsibilities of each shareholder? Does each shareholder have a vote and if so, are votes related to percentage stock holding?
• Profit Distribution: Some shareholders may want to be paid dividends while others prefer to keep money in the business and simply draw a salary. Keeping dividends within the company increases its sale value so it is important to know the options at an early stage.
• Resolving Disputes: Often a dispute will arise such as a change in direction, entering a new market, a change in structure or responsibilities, or individual performance. Disputes are easier to resolve if there is a documented process. This removes a lot of wasted time, expensive legal fees, and allows a faster dispute resolution. Mediation or arbitration are the more common methods but detailing it will be a wise decision.
• Exit Strategy: Inevitably, one or more shareholders will want to exit the business before others do. They may be unwell, maybe want to retire, need to spend time with their family, or start another business. Under what conditions and terms can a shareholder leave? Where do their shares go?

Summary – Lawyers In South Auckland

There are many reasons that people need legal help. One of the less common ones, but nonetheless important aspects, is in the area of shareholder agreements. McVeagh Fleming in Manukau is one of the lawyers in south Auckland who can help with this or many other aspects of law.