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Shareholders Agreement Explained

Please use the link below to purchase your own Shareholders Agreements for R950: https://www.swiftreg.co.za/Swiftreg/p... It is drafted by a Advocate with years of experience in Company Law Compatible with the Companies Act and Standard MOI Script to follow..... This video has everything you need to know about shareholders agreements and highlights the most important clauses that should be in every shareholder agreement. For example, clear guidelines on resolving scenarios such as; what happens if a shareholder fails to contribute financially to their share of the investment. Or how to value your shares if you want to sell them to another shareholder. Disagreement on issues like these can dramatically increase the likelihood of conflict between the shareholders which could lead to either destruction of value, litigation or even business closure. This is why a shareholder’s agreement is so important as its primary function is to protect shareholders rights and provide clear guidelines for resolving disputes. It goes without saying that a shareholders agreement is only required if there are two or more shareholders in a company. Some of our clients get confused between partnership agreements and shareholders agreements. Whilst they are similar in nature, they refer to different legal structures. A shareholder’s agreement is used for registered companies which has directors and shareholders while a partnership agreement is used if there is no legal entity. Therefore, partnership agreements are between sole proprietors and does not offer the benefit of limited liability protection; meaning each partner can be held personally or jointly liable. It is always smarter to finalise a shareholder’s agreement from the start, as the business is unlikely to have been trading long enough to face any major challenges. In addition, the mood amongst the shareholders is usually enthusiastic and positive at the start of a business, which makes it so much easier for everyone to agree on the shareholder’s agreement. To understand shareholders agreements, you need to be aware of the legal hierarchy in terms of the legislation which governs companies. The overarching legislation is the Companies Act which governs all companies, followed by the Memorandum of Incorporation which addresses the rights, duties and responsibilities of the directors and the shareholders and finally, the shareholders agreement which covers issues such as the management of the company and dispute resolution. These three legal frameworks need to work in harmony with each other. However in the context of the legal hierarchy, if any clauses in the Shareholders agreements are in conflict with the MOI; then the MOI will take precedence over the shareholders agreement. The same will apply to the MOI and the Companies Act, where the Act will take precedence over the MOI. Shareholders agreements can be long and complicated documents; I have seen shareholders agreement with over 150 pages with a multitude of clauses such as audit requirements, independent reviews and employee shareholders schemes which do not apply to the average South African private company. With this in mind, we have prepared a 12 page standard shareholder agreement which is suitable for most private companies and compliant with both the standard MOI and the Companies Act. The link is in the description. The shareholders agreement should set out the usual rules and procedures of appointing and removing directors as well as their voting rights. For example, the chairman should have the casting vote in the event of a tied vote. With most private companies the directors are usually also the shareholders. However, it is very important to differentiate between the roles of the directors and the shareholders. So, just to be clear the directors manage the company and the shareholders own the company. The shareholders are required to have their own separate meetings and the agreement should set out the usual quorums and proxy requirements for these meetings. However, when it comes to shareholders voting rights, we do separate between voting by hand and voting by poll. Voting by hand is restricted to one person one vote while voting by poll equates the number of votes relative to the percentage shareholding. This is a very subtle but an important difference in terms of controlling the company.....