Shareholder Issues

company law shareholdersGeneral Advice regarding Shareholders and Directors’ Entitlements and obligations

Shareholders are entitled to certain information about the company in which they hold shares and the Companies legislation provides various mechanisms to ensure that this information is provided in a reasonable period of time after a request is made in that regard.

The duties of a director are many and varied and it is important to understand the boundaries of what can and cannot be done under the rules contained in the Companies Acts. Having the relevant information and advice can be a valuable tool in achieving goals simply or navigating a route through a period of dispute.

Shareholder Agreements concerning the Management of a Company

This covers issues such as the future development of a company (agreement between shareholders not to exercise voting rights in a certain way – eg. to allot more shares) and provides protection for minority shareholders. It might also include clauses in relation to not competing with the business of the company. There will generally also be covenants in relation to not changing certain aspects of the business or management of the company.

Shareholders Agreements On Purchase of Shares

When investing in a private company, an investor may choose to purchase the assets and liabilities of the company or may simply buy the shares in the company.
With an asset and liability purchase, the purchaser has flexibility as to the assets chosen and may therefore avoid involvement with uncertain liabilities.

Prior to a share purchase, an investor should investigate the company in which it is proposed to invest. These investigations are usually referred to as due diligence. They relate to matters such as the review of audited accounts and projections, examination and reporting on contracts and agreements of the company (both internally with its own employees and externally with other outside bodies), carrying out of companies office searches, and investigation of title to lands and buildings, and insurance issues.

When an agreement to purchase shares is being negotiated and drafted, there will often be conditions that must be satisfied before the deal is finalised. Indemnities may need to be given in relation to matters such as tax liabilities etc. and warranties will be sought and given in relation to certain matters. Where there are occurrences in breach of the warranties, these will have to be disclosed in advance.

Shareholder Agreements on Departure from a Company

The issues that frequently arise in agreements of this type include non-competition clauses, taking over of guarantees, undertakings not to take staff, customers, goodwill, or intellectual property of the business.