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This document is a shareholders agreement for a jointly-owned company. It is entered into by five parties, referred to as party 1, party 2, party 3, party 4, and party 5. The agreement highlights the importance of forming the company and establishes the governance and relations between the shareholders. The document consists of several sections, each addressing different aspects of the agreement.
Section 1: Interpretation
This section provides definitions for various terms used throughout the agreement, such as party 1 director, party 1 shares, party 2 director, party 2 shares, and so on. It ensures clarity and understanding of the terms used.
Section 2: Establishment of Company
This section outlines the process of incorporating the company. It specifies the name of the company, the authorized share capital, and the required subscriptions for shares by each party. It also mentions the completion of the establishment of the company and the execution of ancillary agreements.
Section 3: Capital, Further Finance, and Dividend Policy
This section addresses the share capital of the company and the possibility of increasing it. It also discusses the provision of further finance if required and sets out the dividend policy for the company.
Section 4: Directors and Management
This section establishes the board of directors and their roles in managing the company. It specifies the appointment and removal of directors by each party and outlines the quorum and voting procedures for board meetings.
Section 5: Reserved Shareholder Matters
This section lists the matters that require the prior approval of the parties. These matters include issuing shares, selling the company, altering the memorandum and articles, borrowing by the company, and more.
Section 6: Transfer of Shares
This section outlines the process of transferring shares between the parties. It includes the requirement of a transfer notice, the right of the other party to purchase the shares, and the determination of a fair price for the shares.
Section 7: Confidentiality
This section emphasizes the importance of maintaining confidentiality regarding company information and the business affairs of the parties. It sets out the obligations of the parties and their employees in this regard.
Section 8: Restrictions on the Parties
This section prohibits the parties from engaging in any competing business during the term of the agreement, except for certain exceptions. It aims to protect the interests of the company and prevent conflicts of interest.
Section 9: Term
This section specifies the minimum term of the agreement and allows either party to terminate the agreement by giving prior notice. It also outlines the circumstances under which immediate termination is possible.
Section 10: Supremacy of this Agreement
This section states that this agreement prevails over any conflicting provisions in the memorandum and articles of the company. It emphasizes the importance of adhering to the terms of this agreement.
Section 11: Costs
This section determines the responsibility for bearing the costs associated with incorporating the company and preparing and executing this agreement.
Section 12: No Partnership or Agency
This section clarifies that the agreement does not establish a partnership or agency relationship between the parties. It ensures that neither party can commit or bind the other party without proper authorization.
Section 13: Entire Agreement
This section confirms that this agreement, along with any other agreements entered into on completion, constitutes the entire agreement between the parties. It supersedes any previous heads of agreement and excludes liability for misrepresentation.
Section 14: Mutual Consultation and Goodwill
This section emphasizes the parties' commitment to consult and act in good faith to promote the best interests of the company. It encourages open communication and cooperation between the parties.
Section 15: Assignment
This section prohibits the parties from assigning their rights or obligations under this agreement without proper authorization. It ensures that any transfer of shares complies with the provisions of this agreement.
Section 16: Conditions Precedent (if applicable)
This section outlines the conditions that must be fulfilled or waived before completion of the agreement. It emphasizes the parties' obligation to use reasonable endeavors to fulfill these conditions.
Section 17: Amendment
This section states that any variation of this agreement must be in writing and signed by the parties. It clarifies that variations do not constitute a general waiver and do not affect rights and obligations already accrued.
Section 18: No Rights of Third Parties
This section confirms that third parties have no rights to enforce the terms of this agreement. Only the parties to this agreement have enforceable rights.
Section 19: Dispute Resolutions
This section addresses the jurisdiction and governing law for resolving any disputes arising from this agreement.
Section 20: Notices and Service
This section specifies the requirements for giving notices under this agreement. It outlines the methods of service and the addresses to which notices should be sent.
Section 21: Signature
This section contains the signatures of the authorized representatives of the parties, indicating their agreement to the terms of this shareholders agreement.
To use this shareholders agreement effectively, follow these steps:
1. Incorporation: Ensure that the company is incorporated as a company limited by shares in accordance with the agreed characteristics mentioned in Section 2.1. This includes choosing a name for the company and specifying the authorized share capital.
2. Completion: Complete the establishment of the company as outlined in Section 2.2. This involves subscribing for shares, issuing share certificates, and entering into ancillary agreements.
3. Capital and Finance: Understand the share capital structure of the company as described in Section 3.1. Consider the possibility of increasing the share capital and determine the procedure for providing further finance if needed.
4. Directors and Management: Appoint directors to the board in accordance with Section 4.1. Ensure that the board consists of directors appointed by each party and that decisions are made in accordance with the quorum and voting procedures outlined in Section 4.3 and 4.4.
5. Reserved Shareholder Matters: Obtain the prior approval of the parties for any matters listed in Section 5.1. This includes issuing shares, selling the company, altering the memorandum and articles, and entering into significant contracts.
6. Transfer of Shares: Follow the process outlined in Section 6 for transferring shares between the parties. Serve a transfer notice if you wish to sell shares, and allow the other party the opportunity to purchase the shares at the specified price. If necessary, determine the fair price with the assistance of auditors.
7. Confidentiality: Ensure that all parties and their employees adhere to the confidentiality obligations set out in Section 7. Safeguard company information and avoid unauthorized disclosure.
8. Restrictions on the Parties: Comply with the restrictions outlined in Section 8. Refrain from engaging in any competing business during the term of the agreement, unless permitted by the exceptions mentioned.
9. Term and Termination: Respect the minimum term of the agreement as specified in Section 9. Give prior notice if you wish to terminate the agreement, and be aware of the circumstances that may lead to immediate termination.
10. Supremacy of this Agreement: Ensure that this agreement takes precedence over conflicting provisions in the memorandum and articles of the company. Adhere to the terms of this agreement to avoid any conflicts.
11. Costs: Bear your own costs associated with incorporating the company and preparing and executing this agreement, as stated in Section 11.
12. No Partnership or Agency: Remember that this agreement does not establish a partnership or agency relationship between the parties. Do not commit or bind the other party without proper authorization.
13. Entire Agreement: Recognize that this agreement, along with any other agreements entered into on completion, constitutes the entire agreement between the parties. Disregard any previous heads of agreement.
14. Mutual Consultation and Goodwill: Act in good faith and consult with the other party on matters materially affecting the development of the business, as stated in Section 14.
15. Assignment: Do not assign your rights or obligations under this agreement without proper authorization. Ensure that any transfer of shares complies with the provisions of Section 15.
16. Conditions Precedent (if applicable): Fulfill or waive the conditions precedent outlined in Section 16 before completion of the agreement, if applicable.
17. Amendment: Any variation of this agreement must be in writing and signed by the parties, as mentioned in Section 17. Ensure that variations do not affect rights and obligations already accrued.
18. No Rights of Third Parties: Understand that third parties have no rights to enforce the terms of this agreement, as stated in Section 18.
19. Dispute Resolutions: Adhere to the jurisdiction and governing law specified in Section 19 for resolving any disputes arising from this agreement.
20. Notices and Service: Give notices in accordance with the requirements outlined in Section 20. Use the specified addresses and methods of service.
By following these steps, you can effectively use this shareholders agreement to govern the relations between the parties and ensure the smooth operation of the jointly-owned company.