Shareholders agreement: (short)

This document is best suited to a family situation where an executive director retires but remains a shareholder, perhaps to avoid inheritance tax on his death, and still wants to know that his interest is safe. This may include the provision of timely reports and appropriate accounts.

This is a short form agreement which does not include the valuation letter to accountants because it may suit the family best if there is some the basis of valuation.

Neither are provisions included for buyout of shares of a shareholder leaving. It is assumed that the family will make their own arrangements in that regard.

The agreement is concerned principally with the nitty gritty of day to day control and operation.

Shareholders' agreements set the ground rules for the relationship between shareholders. Mostly that means protecting the interests of one or more shareholders against the others. The directors operate a company and make the decisions, but the directors operate only in accordance with the instructions of the shareholders to whom they are accountable. Furthermore, to the extent that shareholders are also directors, they are bound to the terms of an agreement they have signed as a shareholder. So this means that it is really important to have a watertight shareholders agreement.