A shareholders` pact is an important and useful document because it provides a mechanism for defining the principles by which shareholders or partners operate in a joint venture. In this article, I will explain some of the most important points you should consider when you are considering starting a new business or if you already have transactions with other people and you do not have a shareholder pact between you. In addition, the use of a shareholder contract allows the contracting parties to obtain greater protection, the rights of minority shareholders, a quick solution to the blockages, sufficient regulation of the entry or exit rights of the company`s shareholders, reliable methods of assessing the fair value of the company`s shares, etc. Since the shareholders` pact has the added benefit of not being available to the public, unlike the company`s statutes, sensitive details about the parties` role in the management of the company, their rights and obligations, etc., may be defined in the shareholders` pact. These are just some of the important provisions that you should consider when negotiating the terms of a shareholder contract. As you can see, a shareholder contract could literally mean the difference between a surviving company or not. For example, shareholders may accept the advice or decision of a trusted advisor in advance. Unlike the statutes, these agreements are confidential and inaccessible to creditors or non-members. Therefore, they also ensure that your company`s private information remains private. In the absence of a shareholder pact, the law determines how business decisions are made. For example, to dismiss a director, the Companies Act says you need a simple majority (over 50 percent) to vote in favor of the decision. A shareholder contract contains the rights and obligations of a company`s shareholders and generally covers matters that govern management and structure, initial financing and subsequent financing, as well as the management and activity of the company.
The statutes are one of the constitutional documents of a society that defines the rules relating to the internal affairs of society.