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Shareholders’ and Founders’ Agreements

Shareholders’ and Founders’ Agreements Solicitors in London and Essex

We offer specialist advice in connection with Shareholders’ and Founders’ Agreements.

It is not a legal requirement to have a Shareholders’ or Founders’ Agreement in place, however there are a number of reasons why you should invest in one:

  • People forget or misunderstand what they agreed. Setting out the most important terms in a legal document will ensure that the parties are forced to think about potential questions which may not have been considered or anticipated, and to then record the agreed position in writing. That way, the risk of confusion or doubt is significantly reduced and will assist the parties’ and their family members if the business is being dealt with after one or both parties, unfortunately, were to die or become incapacitated.
  • Prevents a shareholder from setting up in competition while being involved with the business and will give the parties a legal remedy if one party tries to do so, of in fact does so. It is not uncommon for one party to set up a competing business if, for whatever reason, they know that their involvement in the business is going to end in the near future.
  • Controlling the transfer of shares. Without a Shareholders’ or Founders’ Agreement in place, there is limited protection for the parties if one of them wants to sell or give their shares to a third party. Your agreement will prevent such a scenario or, at the least, require a party to offer their shares for purchase by the other parties before they are offered out to a third party.
  • Dealing with leavers. Generally, if a party decides to “quit” the business for any reason then this will not necessarily mean they have to give up their shares. They will be entitled to keep them. It is likely to be important to prevent a situation like this arising otherwise the remaining shareholders will be putting in the work on a day-to-day basis while allowing the leaving shareholder to benefit by retaining their shares. In addition to wanting to acquire or cancel the shares of a leaving shareholder, if a party leaves in serious circumstances such as fraud or dishonesty (known as a ‘bad leaver’), it may be desirable to reduce the price payable for those shares. The agreement should also address what happens if a shareholder leaves due to their death.
  • Resolving disputes. We advise that any Shareholders’ or Founders’ Agreement includes a dispute resolution procedure. This might involve any disputes being referred to mediation or arbitration, which can help to save costs and, sometimes, the entire business relationship.

We will work closely with you to ensure that you feel confident about your business relationship, that you are aware of important legal considerations and that your Shareholders’ or Founders’ Agreement is suitably drafted to protect your interest and the business value you have created or will be creating.

Our unique selling point is that we understand what clients want from their lawyers. We will manage your transaction proactively, with careful attention to detail while never losing sight of the bigger picture.

While working with us you will have access to our strong network of other professionals such as accountants, independent financial advisers and bankers.

We offer a range of pricing options and will be happy to discuss these with you. As a client-centred law firm, we will be transparent with you about our pricing and actively manage these in line with our agreements.


Reasons to have a Shareholders’ or Founders’ Agreement in place

We will give you specialist advice and representation throughout your matter, making sure that you have considered and made an informed decision about important legal considerations concerning your business relationship.

These include (but are not limited to):

  • Setting out the rights of each shareholder, differentiating between minority and majority shareholders.
  • Providing for permitted or compulsory transfers of shares, any pre-emption rights and the procedure to be followed in such circumstances.
  • Dealing with good leavers and bad leavers.
  • Controlling the dilution of shareholders.
  • Whether each or only certain shareholders will have the right to appoint a director.
  • Including suitable restrictive covenants on the parties to protect the goodwill of the business and the investments of the shareholders.


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