When people go into business together it’s common for them to enter into a Shareholders’ Agreements to govern how they will own and administer their company. Our preference is to use a tailored version of the company’s ‘Constitution’ as the primary instrument to regulate the affairs of a company. Our reasons are:
Most Shareholder Agreements, Constitutions and Partnership Agreements provide 'pre-emption' rights. These are rights that require someone wanting to sell an interest in the enterprise, to first offer the interest to the other equity holders. But they do not necessarily require the majority to buy.
Well drafted 'pre-emption' clauses in a Shareholders Agreement or Constitution provide you with important protections. But there are a number of potential traps that you need to be aware of.
Most people think the directors of their company are appointed by a majority of shareholders. But often this is not the case. Discover the full picture.