Shareholder's agreement

calahans

Hi,

I am looking to put together a basic shareholder's agreement. Anyone know of a good template? Is it better to go to a solicitor?

Thanks

Calahans

Dutchie

Calahans,
A shareholders agreement is a legal document and should be drawn up by a solicitor who has expertise in this area. A shareholders agreement drawn up by yourself will have no legal basis in a court of law (unless you are a solicitor!)

PM if you want the name of the solicitor who composed mine.

Good Luck.

YouBuyLocal

Can anyone confirm that this is the case?

I am currently setting up a business with a group of other people and we need to write up shareholder agreements. We do not have the cash flow to spend on solicitor fees because our business is initially not capital intensive and we are bootstrapping.

Has anyone got any suggestions on how to draw up shareholder agreements? Can you define share classes yourself with specific rights and profit share agreements or are they subsumed under company law?

Can you put options in so that nobody can sell to outside investors without the consent of the rest? I would like to have an option to buy the shares back myself at a set price.

Any advice would be very much appreciated - I find it unlikely that shareholder agreements would mean nothing in court if not drawn up but a solicitor. I can imagine it being quite risky to draw them up yourself, but I can't imagine them being completely superfluous!

DoMyBooks

I'm not a legal expert so open to correction but I believe that a contract drawn up and signed in good faith by all parties involved would have a legal standing. Regardless of whether a solicitor or lay person drew up the contract.

Obviously your a lot safer going to a solicitor.

dbran

+1

If you are really worried enough to need a shareholders agreement then you should get expert advise and got to a solicitor.

dbran

YouBuyLocal

dbran wrote: »

+1

If you are really worried enough to need a shareholders agreement then you should get expert advise and got to a solicitor.

dbran

Thanks dbran & DMB, but the requisite expression is "Bootstrapping"!

In order to save money on this I need to understand the process thoroughly before speaking to a solicitor. I'd like to hear about other people's experiences. My friend/technical advisor has a shareholders agreement and he says that solicitors are only necessary at the latter stages with regard to defining each individuals role so we have clear measure or metre-stick for whether individuals are fulfilling their commitments, which the shareholdings are based upon.

Issuing basic shares is fine but I would want to know what kind of control they would have? If I reduce my shareholding to 45%, with three other shareholders involved would this leave me at a disempowered position in regard to the issuing of new shares. One of the shareholders (20%) has an absolute commitment to me so that really leaves with with a 65% control. Is there something consequential about the number 50% that gives me total voting rights? Or is it the same as the UK where 75% is the important number?

If I issue 100,000 shares out of 1,000,000 @ €1 per share and offer 15,000 shares to one person, can I call these "Class-B" type shares where by we have defined the legal entitlements of this share type? Or is it the case that there is a legal definition in company law that defines "Class-B" shares and there rights over any share agreement?

Also, can you do this at the point of incorporating the company? Will this cost more than the usual company incorporation fees? I've found a company that will incorporate us for €250, who are good as my friend/tech advisor has used them before.

I know its not good to ask for legal advice and I am skirting the boards rules, I really would hold people libel or anything, but if anyone can share their experiences or somewhere to get information on this subject I would really appreciate it. Its fairly crucial to give the guys some security without giving away so much of the company that I lose control.

ezspeeder

Not sure on this but it may be possible to get generic versions of shareholder agreements and other legal documents. You could then modify. Maybe check with some legal stationery supply companies.

JD Dublin

No offence, anyone who says that a solicitor has to be involved in drawing up a shareholders agreement is talking tosh.

I have seen plenty of agreements done which were solid enough to use in a commercial situation, without the help of solicitors. A simple search on google will get plenty of results, and will give you a checklist of issues and items to be covered.

As a practising accountant, I was a bystander to a shareholders agreement being drawn up between 2 people who were actually in broad agreement. Then they went to 2 solicitors, and €20,000 later the job was oxo, approx €10,000 to each of the solicitors. I had drawn up the aforementioned checklist, but once the lawyers got their hands on it, there was an agreement full of 'the party of the first part' and so on for about 35 pages covering war, revolutions, nuclear holocaust, bankruptcy, ill-health - it was probably better to have if you had to go to the High Court than the one I drew up, but at a large price-tag.

My advice to you is to draw up your checklist in a simple document, get all parties to sign it and have all the signatures witnessed. Most people will stick to an agreement they have signed up to and you dont need to get the lawyers ( or a €20,000 bill ).

YouBuyLocal

JD Dublin wrote: »

No offence, anyone who says that a solicitor has to be involved in drawing up a shareholders agreement is talking tosh.

I have seen plenty of agreements done which were solid enough to use in a commercial situation, without the help of solicitors. A simple search on google will get plenty of results, and will give you a checklist of issues and items to be covered.

As a practising accountant, I was a bystander to a shareholders agreement being drawn up between 2 people who were actually in broad agreement. Then they went to 2 solicitors, and €20,000 later the job was oxo, approx €10,000 to each of the solicitors. I had drawn up the aforementioned checklist, but once the lawyers got their hands on it, there was an agreement full of 'the party of the first part' and so on for about 35 pages covering war, revolutions, nuclear holocaust, bankruptcy, ill-health - it was probably better to have if you had to go to the High Court than the one I drew up, but at a large price-tag.

My advice to you is to draw up your checklist in a simple document, get all parties to sign it and have all the signatures witnessed. Most people will stick to an agreement they have signed up to and you dont need to get the lawyers ( or a €20,000 bill ).

I agree, got a good bit of information for the checklist through Google, so this is the route I'll take. Thanks for the response :-)

antoinolachtnai

What you want to do with classes of shares is definitely possible. However it all gets even more complicated. The obvious, important thing is whether and how these can be converted into ordinary shares. B shares that don't have voting rights probably aren't worth very much at all.

This makes agreeing a shareholders' agreement a lot more complicated. From the point of view of the person taking the B shares, they will certainly need legal advice and may reasonably want elaborate clauses to protect their position.

By the sounds of it, share options might be a better way for these other members of the team to participate, at least from your point of view.

There are also things like tag-along and drag-along. These are basically commercial issues that are covered in a shareholders' agreement. They are critical for minority shareholders, especially holders of non-ordinary shares. If you don't know what tag-along and drag-along, you probably need commercial advice as well as legal advice.

All those thresholds - depends what you want to do. It's quite complex. If your Articles of Association and shareholders' agreement are written appropriately, you can do this. You may only need a majority of the directors. If you issue new shares, you almost certainly have to offer these shares to the existing shareholders, not just yourself, or the new shareholders. There are also issues about oppression of minority shareholders.

All that said, JD has a strong point. These things can get way too complex.

YouBuyLocal

I want to write a shareholders agreement for each member of the team but I want to separate them so each team member doesn't know what the other holds. The only things I want in the agreements (other than all the complicated stuff that I have to account for regardless) are what the team members role is and what shares he has. Can I incorporate the company and issue all shares to me and one other guy, then do private agreements with each member to issue them shares tying them to a confidentiality agreement, which supercedes the Arts & Mem of Ass?

antoinolachtnai

No, you really cannot do this, certainly not on your budget.

YouBuyLocal

I'm not sure its a budgetary issue as I have template shareholders' agreements - and I know that is perfectly acceptable - and can incorporate a company for €250 quid with a solicitor.

Once the company is incorporated, how exactly does it issue new shares? Can the issuance of new shares be done without amending the Arts & Mems if it has unanimous support from all shareholders in the Arts & Mems with their signatures on the contracts to issue the shares?

antoinolachtnai

Best thing is to seek the counsel of your €250 solicitor.

YouBuyLocal

antoinolachtnai wrote: »

Best thing is to seek the counsel of your €250 solicitor.

So there is literally nobody here that knows how to issue shares after the company has been incorporated?

That would seem a bit unlikely:/

dbran

Hi

First you need to check that the company directors have the power to issue shares. Check the company's memo and articles to see what the story is. If not a resolution needs to be passed to authorise the issue of new shares. You also have to ensure that the shares are offerd to existing shareholders first and if they decline then you may issue then new shares and share certificates to the new shareholders. Update the register of shareholders and other statutory registers if appropriate and file a G1 in CRO to say the shares have been issued and the particular details on form B5.

That should be it basically.

dbran