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SHAREHOLDER AGREEMENTS

A Shareholders Agreement is a contract between the owners of the company, i.e the shareholders. While a Constitution is a publicly accessible document, a shareholders agreement is confidential to the parties.

It deals with matters such as:
•    the type of business the company is to carry on;
•    finance requirements;
•    what happens in the event a shareholder dies;
•    decisions that require the agreement of all shareholders;
•    restrictions on competition;
•    what happens if a shareholder wants to exit;
•    policies regarding distribution of profits;
•    what happens if the company is placed into receivership or liquidation.

Shareholder disputes can be costly and in many cases avoided by having an appropriate shareholders agreement in place. If you are a shareholder in a company that does not have a shareholders agreement, I suggest it is on the agenda for discussion at your next meeting.

Written by Kylie van Heerden at 15:00

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