There are a huge number of reasons why having a shareholder agreement in place is highly advisable. Some are practical such as setting out whether shareholders are expected to work in the business, policy on payment of dividends, bank mandate and dispute resolution. Other forward thinking considerations and reasons for having a shareholders agreement include exit, the possibility of bringing in new shareholders, whether veto powers are sufficient and generally what happens if shareholders fall out.

Based on the problems we see the consequences of not having a shareholder agreement (or having only a very basic one) and having to rely on a standard constitution if you are a shareholder, can be significant.

If you can control 75% of the voting power you can amend a constitution and cure many problems. But, minority shareholders do not enjoy this power.

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Disclaimer: This article is general in nature and should not be treated as professional advice. It is recommended that you consult your advisor.  No liability is assumed by Harris Tate Limited for any losses suffered by any person relying directly or indirectly upon the article above.