Basic Shareholder Agreement – No Share Issue Short form version

Basic Shareholder Agreement – No Share Issue

This Basic 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.

This Shareholder Agreement  is a short form document which creates a contractual relationship between the shareholders of a private limited company. It 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.

The main advantage of a Shareholder 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 - No 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, any people to whom shares are transferred must agree to be bound by the terms of this Basic Shareholder Agreement - No Share Issue as a precondition to the transfer. The more detailed clauses regarding management and share transfers as well as non-competition provisions are excluded from this Basic Shareholder Agreement - No Share Issue. 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".

This agreement assumes that the Company will continue to use its existing Articles of Association. However, it is recommended that a Company uses one of the Simply-docs Articles of Association with this Shareholder Agreement. Where other Articles are used caution should be taken for inconsistencies between the two documents. Clause 16 of this Basic Shareholder Agreement - No Share Issue 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.

At the front of the agreement we have attached a set of specific guidance notes 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.

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.

Square brackets are used to denote optional words and phrases or an either/or choice. If the wording is required, the pair of square brackets should be deleted. If the wording is not required, then the pair of square brackets and the wording in between should be deleted.

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

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