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WHAT IS A SHAREHOLDERS’ AGREEMENT?

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WHAT IS A SHAREHOLDERS’ AGREEMENT?

Owning a business of your own is a dream for many, and having a friend alongside for the hustle always seems better than venturing all alone!

You would probably expect a huge “BUT” at this juncture, but no (not yet)! Starting a business with one or more people you trust is definitely not a bad idea! You could raise funds among yourselves easier and faster, you could divide the responsibilities and work load so it doesn’t get so stressful on you and you alone, and you have access to each other’s contacts and resources which might be very valuable for a new company!

But here’s where the BUT comes. There will be good days and bad days, and sometimes, unfortunately, there will be disputes among the shareholders. At times like this, you would appreciate having a shareholders agreement, which will govern the relationship between the shareholders (including how decisions should be made and how sales can be bought/sold/transferred). And, if you don’t have one, you would regret not having one.

A shareholders agreement will contain provisions that cover the following and more:

  • Obligations and roles/responsibilities of various shareholders;
  • Capital and financial contributions of each shareholder (including possible future financing arrangements);
  • Management of the company;
  • Special rights of specific shareholders or groups of shareholders;
  • Protection of minority shareholders;
  • Restrictions on sale or transfer of shares;
  • Rights of first refusal;
  • Non-compete;
  • Dispute resolution.

Take our word for it – sign a shareholders’ agreement right from the start for a peace of mind. And if you need help for that, we are just an email away.

Get in touch with us at matthewang@pkwalaw.com.

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