Standard Shareholder Agreement – No Share Issue

This Standard Shareholder Agreement - No Share Issue is designed for private companies in which each shareholder will own an equal share, so that there are no minority shareholders and no majority shareholders.

Therefore there is no bias in the Agreement toward one particular kind of shareholder.

What this agreement is and what it includes

This agreement creates a contractual relationship between the shareholders of a private limited company.

This medium length Shareholders’ Agreement builds on the basic version and includes provisions such as:

• the appointment and business of the board;
• representations on each party’s ability to validly make the Agreement; and
• non-competition with the company and non-solicitation of its customers by the shareholders and employees after they no longer hold shares in the company.

This agreement has been amended in line with the provisions brought in by the Companies Act 2006 together with other improvements.

Why shareholders use a shareholders’ agreement

A shareholder agreement allows individual shareholders to enforce their rights under the agreement against each other, in addition to enforcing shareholder rights against the company under its constitution.

This can provide more protection from the possibility of being squeezed out of the management of the company.

When this agreement is intended to be used

This Standard Shareholder Agreement - No Share Issue is intended to be used by shareholders of a company which already has shareholders and may have been only recently incorporated or which has been established for some time but the shareholders now wish to have a shareholders’ agreement in place.

Family company focus and pre-emption

This Shareholder Agreement is well suited to family companies and sets out the basic elements of the shareholders’ relationship with each other.

• It includes the right to first refusal (pre-emption) if a shareholder wishes to sell their shares, helping to prevent outside investors from muscling in on the company.
• Any people to whom shares are transferred must agree to be bound by the terms of this Standard Shareholder Agreement - No Share Issue as a precondition to the transfer.

For more detailed pre-emption provisions, please see "Shareholder Agreement - Long - No Share Issue - Majority Shareholder Bias" or "Shareholder Agreement - Long - No Share Issue - Minority Shareholder Bias".

Guidance notes, articles of association and complementary clauses

At the front of the agreement a set of specific guidance notes is attached to assist in tailoring the agreement.

These guidance notes do not form part of the agreement and should be removed before the agreement is used.

We recommend that you use one of the Simply-docs Articles of Association with this Shareholder Agreement.

Where other Articles are incorporated, caution should be taken for inconsistencies between the two documents.

Clause 18 provides that the Shareholder Agreement will prevail over the Articles in the event of an inconsistency, but inconsistencies should nevertheless be avoided because claims for breach of a Shareholders’ Agreement are subject to different rules to claims for a breach of the Articles.

Also available from the Simply-Docs site and listed below under Related Documents are separate clauses which are ready to be incorporated into this agreement if required, including a deadlock provision and a shareholder employee dismissal clause for use where an employee shareholder is dismissed or resigns.

Standard Shareholder Agreement – No Share Issue is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.