Every limited company has a set of articles of association. This is a document governing management and administration of the company, it is lodged at Companies House and is therefore a public document.
Many small companies have standard articles, not always the best solution particularly when in business with other shareholders as they are not tailored to the needs and circumstances of individual shareholders.
When you are in business with other shareholders you should have in place either articles tailored for your circumstances or a shareholders agreement to deal with:
- the shareholders in their dealings with the company
- the shareholders in their dealings between each other
- the company and its dealings with shareholders.
For example, what happens it a shareholder becomes incapacitated or a shareholder dies prematurely?
Should all shareholders have the same voting rights? Should there be different rights attached to shares? Should there be different share classes dealing with different rights as to the transfer of shares? Should there be differing dividend entitlements?
A shareholders agreement will provide a framework for internal governance of the company and protect shareholder rights, facilitate effective decision making, provide clarity in the operation of the business and deal with events that will affect shareholders during the life of the business.
Feel free to call or email me for an informal, no obligation chat.
Jane Latham
01225 287516 jane.latham@lcls.co.uk