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Shareholder Agreements and Partnership Agreements

I have had the pleasure of using Steven for many, many years for both Business and Personal legal matters – with some great results. Highly recommended.

Jeff Gunn

Bright Ideas Global Group Plc

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0116 3667 900

Steven@stevenmather.co.uk

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Shareholder Agreements & Partnership Agreements 

Shareholder Agreements, LLP and Partnership Agreements 

Steven Mather Solicitor is a specialist shareholder agreement in Leicester, backed by the national team at Nexa Law. Steven has acted for hundreds of businesses and so if you are looking for legal advice on Shareholder Agreements, LLP Agreements, Partnership Agreements, Cross-Options Agreements or other similar matters you’ve found the right lawyer. Every time Steven strives to provide:

  • Plain English Advice
  • Time – to understand your situation and all that you’re faced with
  • Results – getting the best possible result for you
  • Value – fixed fees for your certainty where possible
  • Convenience – meetings by phone, video call or in-person at a time to suit you. 
 

What is Shareholders Agreement? 

A shareholders agreement is a legally binding contract between two or more shareholders of a business. They are really important documents, probably one of the most important in a company’s legal life. A shareholders agreement is for shareholders of a limited company. A partnership agreement is for partnerships.

I’ve heard it all the time – “we’re friends, we’ve worked together, we won’t fall out”. Or it can be family. Either way, a shareholders agreement can help when you do fall out!

Shareholders Agreements will typically include clauses about:

  • Regulate the affairs of a company without it being publicly available like Articles of Association are
  • Impose restrictions on shareholders both during and after their time of share ownership
  • Address what happens to your shares on death
  • Ensure that shares are not sold to a third party
  • Govern the rights and responsibilities of shareholders
  • Set down voting requirements and list what may require a greater percentage of the vote.
  • Help minimise the risk of shareholders disputes.

What is a Partnership Agreement?

A Partnership Agreement meanwhile is an absolutely crucial agreement for any partnership, simply because without one the partnership will be governed by law from nearly 200 years ago and its wholly inappropriate. In a written Partnership Agreement, you’ll have an agreement over things like assets, capital share, decision making, expulsion and much more.

Why use Steven to write your Shareholders Agreement or Partnership Agreement?

I’m well into my second decade of helping small business owners draft and review shareholder agreements and partnership agreements.

I’ll work with you (and sometimes your accountant and/or financial advisor) to get the document right, bespoke for your specific needs and requirements.

Importantly, I’ll ensure you understand what it all says. Sometimes these agreements are complicated and not the easiest to read through, but our task is to ensure that you know how it works.

Steven acts for large and small businesses. He knows what is right for you and can give great legal advice as well as commercial business advice.

A well drafted shareholders agreement will include a wide variety of terms. It is a contract between you and your fellow shareholders and the company itself.  A typical shareholders agreement will include terms relating to: 

  1. Business of the Company – What the company does and doesn’t do. 
  2. Company obligations – things the company is agreeing to do
  3. Shareholder obligations – your obligations as a shareholder 
  4. Dividend policy – how and when dividends can be paid
  5. Transfer of Shares – stopping shares from being sold to a third party – also known as pre-emption rights
  6. Issue of further shares – limiting new shares from being issues to stop watering down
  7. Restrictions on the parties – stopping shareholders from setting up in competition, stealing customers or staff
  8. Directors – usually a shareholder can appoint a director 
  9. Confidentiality
  10. General boilerplate clauses

There are a number of a benefits to having a shareholders agreement. These include: 

  1. Minimising shareholder disputes
  2. To have different class of shares with different dividends payable
  3. To ensure a third party cannot buy someone’s shares without first offering them to the other shareholders
  4. To protect founders on a potential exit / disposal
  5. To give minority shareholders protections 
  6. To restrict shareholders from setting up in competition with the business
  7. To demonstrate to Banks and financial providers that you’re a proper business
  8. To deal with what happens to the shares on death. 

What are pre-emption rights? ‘Drag and Tag’ rights – it’s all a bit confusing

Yes, I hate jargon too.

Pre-emption rights are clauses within shareholders agreements which deal with what happens to shares if one shareholder wishes to sell.

The most common pre-emption right states that prior to a selling shareholder being able to sell their shares to a third party, they must first offer their shares to one or all of the other shareholders first, who get the right of first refusal.

Drag and Tag options are usually used where there is a majority shareholder who wants ensure that if they agree a sale of their majority shares, that the minority shares are also sold – or dragged along – so that the whole share capital of the business can be sold. Tag along rights are effectively the reverse, allowing a majority shareholder to tag onto the sale of minority shares.

Partnerships are a set of relations between parties carrying on a business in common with a view to profit. Partnerships do not have a separate legal personality and so cannot own assets or grant security over them, nor can they sue or be sued (however court rules permit the partners to be sued and to sue in the name of the firm rather than listing them individually in any claim. The Partnership Act 1890 (PA 1890) forms the basis of today’s partnership law. Although the PA 1890 covers most of the necessary ground in setting up a partnership, it does not cover all of it and some of its provisions are outdated. Therefore it is always advisable for partners to enter into a formal partnership agreement.

The usual terms of a partnership agreement may include: 

  1. Commencement and duration
  2. Partnership Name and place of business
  3. Capital
  4. Partnership Property
  5. Profits and losses
  6. Capital and Current Accounts
  7. Drawings
  8. Accounts
  9. Banking
  10. Insurance
  11. Duties and power
  12. Restrictions on Partners
  13. Managing Partner
  14. Meetings and voting
  15. Indemnity and expenses
  16. Holidays
  17. Cars
  18. Maternity Leave, Paternity Leave, Adoption Leave, Shared Parental and Parental Leave
  19. Incoming partners
  20. Retirement and death
  21. Expulsion
  22. Payments to Outgoing Partners
  23. Restrictions on Outgoing Partners
  24. Further provisions relating to Outgoing Partners
  25. Confidentiality
  26. Dissolution
  27. General Boilerplate Clauses

Steven will always provide you with a fixed cost for whatever work you require.

To allow us to do that, we always suggest we hold an initial free ‘discovery call’ to understand better your requirements.

Generally speaking, the price of a basic shareholders agreement is £1,500 plus VAT up to perhaps £5,000 plus VAT for a more complicated one.  A Partnership Agreement will tend to be around £1,500 plus VAT. 

So get in touch today for a free no obligation call with one of our shareholder/partnership law solicitors.

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Next Steps for your Shareholders Agreement?

Whether you are putting in place some new shares, looking at a shareholder agreement or you just don’t know what you need – get in touch.

Steven’s typical client is probably like you – a business owner who knows their business well but needs a hand with legal stuff. I’m here to be your trusted advisor.

Call me for a free no obligation chat on 0116 3667 900, email me steven@stevenmather.co.uk or click the buttons on the right of the page to use another method like WhatsApp or Messenger.

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