The importance of a Shareholders’ Agreement

In this blog of Mercury lawyers in Marbella, Spain, we are going to talk about the importance of a shareholders’ agreement.

 If you are a company with more than one shareholder you should really have a shareholders' agreement to protect the interests of each shareholder and the company. Put simply, this is a legally enforceable agreement between the shareholders that sets out how the company will be run and how decisions will be made. Typically it covers things like how to deal with any disputes between shareholders, sets out things that require a unanimous decision of all the shareholders, the transfer of shares and places restrictions on the shareholders running other businesses that might compete with the business. These are only a few of the things that a shareholders’ agreement traditionally addresses. In some cases the shareholders' agreement can be quite lengthy especially if there are a number of shareholders each of which is doing different things within the company.

Dividend and profit payment policy

One of the key issues of a shareholders’ agreement is that it will normally set out the dividend and profit payment policy. How much should be left in the company and how much should the shareholders be entitled to take out whilst at the same time ensuring that the company is able to continue as a going concern and have the auditors sign off on this issue when it comes to the annual account. This can be a delicate question and require careful handling, that is why our expert lawyers in commercial law in Marbella, Málaga and now also expert lawyers in commercial law in Sotogrande, Cádiz, are at your disposal to clarify any type of doubt in this regard and advise you on how to proceed in the best way without attacking the interests of the company

Another issue is how to resolve disputes that may arise. One school of thought believes that a few months should be given for the dispute to be sorted out. If no agreement can be reached by the end of say, three months, then the shareholders agree to liquidate the company. In this way, the Sword of Damocles hangs over the heads of the shareholders encouraging them to find a solution that works. The logic goes that, if they cannot find that solution within a reasonable time period, then they should not be in business together and should go their separate ways.