Basic Shareholder Agreement – New Share Issue Short Form Version

Basic Shareholder Agreement – New Share Issue

CO.SH.01.01

This Basic Shareholder Agreement - New Share Issue is intended to be used by shareholders of a company which has only recently been incorporated or purchased “off the shelf” at the time of its execution. It provides for the immediate issue of new shares. It is a short form document which creates a contractual relationship between the shareholders of a private limited company.

This document has been updated as of July 2018 to include an appropriate reference to GDPR compliance as a management obligation (this is an optional contractual obligation) as well as updated and modernised more generally.

This agreement 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 toward one particular kind of shareholder.

The main advantage of a shareholders’ agreement is that in addition to enforcing their shareholder rights against the company under its constitution, it allows individual shareholders to enforce their rights under the agreement against each other, providing more protection from the possibility of being squeezed out of the management of the company.

This Basic Shareholder Agreement - New Share Issue is well suited to family companies. It sets out the basic elements of the shareholders’ relationship with each other and includes the right to first refusal (pre-emption) for the parties should one shareholder wish to sell their shares, helping to prevent outside investors from muscling in on the company. Furthermore, anyone to whom shares are transferred must agree to be bound by the terms of this agreement as a precondition to the transfer.

At the front of the agreement is attached a set of specific guidance notes to assist in tailoring the template. These guidance notes do not form part of the agreement and should be removed before the agreement is used.

It is recommended that companies 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 22 of this agreement 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 Complementary 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.

Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.

This Shareholder Agreement is in open format. Either enter the requisite details in the highlighted fields or adjust the wording to suit your purposes.

Once you have purchased access to the appropriate document folder click on the “Download Document” link below. You will be asked what you want to do with the file. It is recommended that you save the document to a location of your choice prior to viewing.

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