A shareholder’s agreement is a contract between the shareholders of a company. The purpose of it is to outline the procedures to be followed within the company and how the company is to be managed. It can also serve as a means to address issues that might cause shareholder conflict in the future. It is confidential and is not available to the general public. It can be very beneficial to family companies as an aid to avoid disputes further down the line. Matters that are often addressed in a shareholder’s agreement are as follows;
Provisions can be put in place to restrict the transferability of shares. Consent of other shareholders can also be added and provisions for what happens in the event of divorce or death.
Differing shareholders may have differing views on how to distribute the wealth of their company. A shareholder’s agreement can be used to agree upon such a policy.
The agreement can provide for clauses which state that certain decisions may only be reached if a certain % of shareholders approve of it. This would help protect minority shareholders in many instances.
Conditions can be put in place for share valuations upon a shareholder’s exit from the company. Other clauses include the rights for other shareholders to buy the shares before they are offered to the market and the right for other shareholders to buy the shares at a discount compared to third parties.
This can be of great benefit to shareholders and can provide a roadmap to be followed in the event that shareholders have a dispute. This can help prevent significant legal bills in the future.
Although it is often far from people’s minds at the time, the best time to introduce a shareholder’s agreement is when a company is being set up. Where this is done, it can be of great benefit to the company and its shareholders.
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You may have seen our blog late last year where we spoke about the future of accounting firms, which was one of the key areas of discussion at our international network conference in Rome. So, it was no surprise to see that in the Spotlight section of February’s Accountancy Ireland (Chartered Accountants monthly publication) there was a focus on Cloud Computing, Cyber Security and Tech Trends for 2018.
The same key ideas come up in these articles as did at our conference in October. Ideas and terms such as:
Change is never easy. While many would like to bury their head in the sand and hope change doesn’t happen, it is clear however that not only will change happen, it is happening. Our advice to business owners and leaders is to embrace this new technology. See how it can help drive your business forward by reducing costs, increasing sales or improving productivity.
A wide variety of articles and reports can be found covering the topics above in more detail. We will also be releasing some blogs on Blockchain over the coming months. While access to the articles noted above can be found on Chartered Accountants Ireland website.
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Business is always changing. Your company will go through various stages of the business lifecycle. What you focus on today will change and require different approaches to be successful.
The beginning of the business idea. Get advice from as many sources as possible. Review profitability, the market, competitors and the business structure. A good business plan is vital for success.
Make your business a legal entity. Adjust to your customers’ needs and wants. Establish a customer base and concentrate on marketing and profitability. Reviewing the business plan, budgets and cashflows is vital.
Fine tune your business model, sales model, marketing model and operations model. While managing a good team concentrate on sales and marketing. Consider the need for external consulting advice on the business development.
The business has a steady income and flow of customers and the business feels like routine. If deciding to expand your offerings or move into a new market, you must consider the risks; competition, resources required, time required, the effects on current customers and the financing.
Your business could still be growing and the current option is to decide to take a step back towards the expansion stage or to think of a possible exit strategy. Is the business financially able to cover an unsuccessful attempt at expansion? Have you planned your exit strategy?
Not all businesses experience every stage of the lifecycle and some experience them in a different order. Every stage of the business lifecycle brings new or re-occurring challenges. Solutions that may have worked for one stage may not work in another stage, which is why you should always adjust and review your business plan and operations.
If you need any help, our friendly team of experts can be your partner through each stage of the business lifecycle. Please contact Lisa Byrne, Audit Manager at Cooney Carey, on 01 677 9000 or by email: firstname.lastname@example.org