It is to be hoped that even if you have a shareholder contract, you will not have to rely on it, but if you have not introduced one, it would be shameful to be able to wish you had it! It is much easier to agree on the terms of the shareholder agreement before you start making money than afterwards, because people naturally become more protective and in turn harder to protect the swallows from the relationship, protect the business and protect your investment in the business. The effects on minority ownership when unwanted changes to standard articles are implemented can be serious and the minority shareholder remains stuck in the changes to the articles, even if you did not vote in favour of it. Unlike the company`s statutes, the shareholders` pact is confidential. It covers key issues such as corporate administration, senior management, new share issues, day-to-day management, decision-making and shareholder departure. Shareholders should consider entering into a shareholders` agreement as soon as possible after the company is created or after the first shares have been issued. Another concern is where a minority shareholder could transfer its shares to anyone. This could create problems for other shareholders, especially if the sale is made to a competitor or someone else who does not want to involve other shareholders in the company. But conversely, forcing a disgruntled shareholder to stay can create more problems than having a new unknown shareholder interested in the success of the company. All shareholders must agree to make business prosper.
To overcome these problems, shareholder agreements often contain rules on share sales and transfers – to whom shares can be transferred, under what conditions and at what price. It is a useful document for all shareholders of the company, whether the shareholder is a minority or majority shareholder of the proposed company. In the absence of a shareholder contract, a minority shareholder (who owns less than 50% of the shares) generally has little control or control over the management of the company. In fact, control will often fall to one or two shareholders. Businesses are generally majority-managed and although the statutes contain provisions relating to the protection of the minority, these may be amended by a special resolution by holders of 75% of the shares entitled to vote. There are laws that offer limited protection to minority shareholders, but they can be costly and may not get the necessary remedies.