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Why you need a shareholders agreement

by MJV&Co

In the last few months, our commercial law Solicitors at MJV & Co Solicitors have been advising an increased number of companies on the need for a shareholders agreement.

Partnerships almost always have such agreements setting out what happens when one partner retires or passes away, if there is a disagreement, if the business is to close and so on.

However, the shareholders in limited companies tend not to have shareholders agreements, which deal with the same eventualities. If you or someone you know is a shareholder in a small business, you should ask them what would happen to their shares in the business if they passed away? Would their next of kin be able to contribute to the business? Is this fair on the other shareholders or would it be better for the company to purchase insurance, which our colleagues at Rawcliffe & Co Chartered Accountants tell us is normally tax deductible, that would buy out the deceased shareholder leaving the others to continue to run the business and the next of kin with a fair settlement.

These are all the sorts of thing that can be dealt with in a shareholders agreement.

Shareholders agreements are not as expensive as you may think. At MJV & Co we start with a precedent that deals with the main clauses and fill in the blanks based on the wishes of our clients. Things can be added or removed, but starting with a model shareholders agreement saves time and money. For most people, the agreement needs very little changing and the cost of an agreed and executed shareholders agreement can be as little as £500 plus VAT.

If you would like to know more or for a free initial appointment, call us today on 01253 858231 or e-mail