Shareholders’ Agreement – do we need it?
Introduction
Many shareholders of a company enter into a shareholders’ agreement with each other as to how they will behave in respect of their company. However, the agreement is widely disregarded by many businesses as it is not a legal requirement. Some shareholders believe that nothing will go wrong in the future. Many shareholders consider an agreement unnecessary, as they could rely on their close friendship with other shareholders, to solve problems. Some shareholders also feel that if the provisions in an agreement, could also be included in the company’s articles of association, then why the need for a shareholders’ agreement? This article will explore what a shareholders’ agreement is and whether or not it is needed.
What is a Shareholders’ Agreement?
A shareholders’ agreement is a private contract between the shareholders of a company that creates legally binding obligations between shareholders. The agreement provides clarity on important matters that affect shareholders, such as their duties, and how disputes are to be resolved, for example. A shareholder does not have to enter into an agreement. If a shareholder enters into an agreement he must do so without compulsion. Agreements are not regulated by the Companies Act 2006, so there is no legal process under the CA 2006, to alter the agreement. Therefore, most shareholders’ agreements will normally state that all shareholders, who are a party to the contract, must give consent to amend it.
Do I Need a Shareholders’ Agreement?
Friendships with other shareholders could deteriorate without a well drafted agreement, resulting in expensive litigation. A minority shareholder can have more control in the running of a business, under an agreement, as all parties to the contract, must agree to an amendment. A shareholders’ agreement can include a shareholder’s personal rights which are contractually enforceable, for example, the right for a specified person to be appointed as a director. By contrast, if this right was included in the company’s articles, it would not be contractually enforceable under section 33 CA 2006. An agreement also allows for commercially sensitive information to be included, as it is a private document. The impact of Covid-19 has necessitated the need for a shareholders’ agreement. The pandemic has initiated changing circumstances for business owners, such as cash flow problems, a desperate need for investment, shareholders becoming incapacitated due to Covid-19. A shareholders’ agreement is essential as it can be tailored to suit the needs of the business and cover a myriad of situations.
Conclusion
A shareholders’ agreement is a crucial document that legally binds all parties and can avoid potential conflict between shareholders, especially as the company’s articles of association, do not provide adequate protection. Obtaining a bespoke shareholders’ agreement from MLS will ensure the effortless running of the business and provide it with the best chance to flourish financially. It is imperative that every company has a shareholders’ agreement, or an updated agreement, that grows in harmony with the business, and takes the impact of Covid-19 into account.
This article is for informational purposes only and does not constitute legal advice. Contact us today on 02144 478 730 to book your free, no obligation, consultation.
Author: Niresh Naidoo
Photo by krakenimages on Unsplash
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What is the role of an Executor?
What is an Executor?
In short, Executors are people authorised by a Will to deal with a deceased’s estate. They are also responsible for ensuring that the instructions set out in the Will are carried out.
This formal authority is obtained by “proving” the Will at the Probate Registry, which issues a grant of probate as evidence to everyone that the named Executors have the authority to administer the estate.
When the grant of probate is issued, the deceased’s Will becomes a public document.
What are the main duties of the Executors?
The duties of the Executors are mostly to collect the estate, pay all debts outstanding at the date of death (including those arising during the administration of the estate) and to distribute the residue of the estate.
An Executor should be a trusted and reasonable individual who is over the age of eighteen.
If there is no one that a person making the Will could or would like to appoint as an Executor, then there is always an option to appoint a solicitor instead. Solicitors will charge for this service but this would come out of the estate and is often seen be ‘money well spent”
An increasingly popular, and often more affordable option, is to name family members or friends as Executors and to appoint a solicitor to assist the Executors throughout the process. This could be clarified in a Will and significantly lessen the burden of becoming an Executor while still holding onto the control over the estate.
What would be some of the other roles of an Executor?
- Checking to see if there are any instructions regarding the funeral – this includes checking if there is a pre-paid plan or insurance to help pay for it as well as any specific requests about the funeral itself.
- Notify all of the relevant people such as insurance companies and banks of the deceased passing.
- Settling the deceased persons finances and paying any bills that are owed
- Valuing the estate.
- After a valuation has been done on the deceased estate the executor will have to deal with paying Inheritance Tax (if applicable).
- Keep an account for what has needed to be spent and how everything has been administered to show that the Executors have administered the estate properly.
The above roles are only a handful a of what the Executors have to, but it shows the level of responsibility the Executors have and that it is not often an easy and straightforward task.
Executors also be beneficiaries?
Executors do not have to be beneficiaries of the Will, but they can be. Most clients like to leave a gift in their Wills in order to show their gratitude and appreciation to the Executors for the work they had to carry out.
Here at My Local Solicitor, we are be more than happy to discuss your particular circumstances and help you choose your perfect Executors and/or assist them with their role when required.
Written by: Jessie Smith and Marta Williamson
Photo by Ben White on Unsplash
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MLS celebrates: Doctor Ivy Williams
Doctor Ivy Williams was a pioneer for women who joined the ranks of a male dominated profession on the 10th May 1922. It is remarkable that in nearly a hundred years since women were able to be called to the Bar in England and Wales, we still see women under-represented in the legal profession. Despite this passage of time, the Bar Standards Board Annual Report 2019/20 records that women only account for 39% of barristers and the retention rate for women 10-15 years call is far too low. I am sadden but not surprised.
Add the demands of family and child care to the day-to-day challenges of an unrelenting workload with long hours, too many open files and, often, a general lack of support and one can quickly see why. It is women who often take the strain. Balancing work-life with home-life in a competitive legal world which often goes far beyond the ‘9 til’ 5’ risks burn-out.
One hundred years later and we are doing “our bit” here at MLS by challenging status quo and disrupting legal sector with our new firm model. We bring our consultants relief through offering another way of working in the law. With a support and mentoring programme which prioritises our team, flexible working and 100% control, we can help them thrive in tandem with enjoying their homelife.
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Elen Hughes joins My Local Solicitor
Like so many, solicitor Elen Hughes has needed to completely change the way she balances her home and work to meet the needs of both her clients and family over the past year. (more…)
Read MoreDo I need a digital will?
A recent survey carried out by the Law Society confirmed that a staggering 93% of those who have made a will had not included any digital assets in their will*.
What are digital assets
Digital assets are important and can include everything from your free email and social media accounts through to your cherished family photos and important online bank accounts.
Despite the huge impact that technology has had on our lives in the recent years, few people understand what happens to their digital assets upon their death or why it is important to include them in their will.
I already have a will do I need to make it digital.
Omitting digital assets from a will can leave family members unable to access online accounts or photos. Closure of the deceased’s social media accounts will also be very difficult.
Furthermore, not having a digital will can seriously complicate obtaining the information for probate purposes thus making the whole process more stressful, longer and ultimately more expensive.
What is a digital Will?
Digital will is a will which deals with both your physical and digital assets. A qualified a solicitor will be able to advise you how to best include both types of assets in your will and draft a legally binding document.
MLS’ tip to keep your digital Will up to date:
Keeping a clear record of online passwords ensures that your estate is inherited exactly as you wish, and your loved ones are not faced with any additional stresses during probate.
Does your Will reflect your lifestyle?
Here at My Local Solicitor, we are proud to be ahead of the curve and writing modern digital wills is what we do best. For more information, email hello@my-local-solicitor.com
*A Populus survey of more than 1,000 members of the public commissioned by the Law Society asked several questions about whether people had made a will. The survey took place in late June 2020.
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