It’s often not taken into consideration as it may be the start of a newly formed company purchasing property for example where everything is agreed in principle and progressed on trust or the shareholders defer it to a future date. Some people believe that it may be a waste of time and that time is better spent on running the business itself.
It’s the typical …… “I wish I had an agreement in place…” situation when the shareholders fall out and have given no thought to fundamental issues such as pre-empting a moment in time where one may want to leave the business or not want to proceed with the same course of action that the other may want to, such as taking on a new lease to expand the business. Another example maybe where one shareholder of a property development company may want to sell, rent, purchase a property and the other doesn’t.
Of course, a shareholders’ agreement needs to be tailored to the company and here are some issues that any shareholder of a company needs to consider:
The absence of a shareholders’ agreement opens the potential for disputes and disagreements between the shareholders.
Remedies for breach
A breach of the shareholders’ agreement is a breach of contract and gives rise to contractual remedies: damages etc (although damages may be difficult to quantify).
- Imran Choudhary, June 2018