The importance of having a shareholders’ agreement

Numerous professional healthcare businesses, such as care home operators, are structured as limited companies. In many circumstances, such companies have a number of shareholders, and regulating their relationship can be crucial in securing the future prosperity and success of the underlying business.

All UK limited companies are required by law to have a set of articles of association. A company’s articles of association typically govern the day-to-day management of the company. At one end of the spectrum, articles of association can be incredibly straightforward; at the other, they can be incredibly complex.

In many situations, it is also appropriate for a company’s shareholders (and often the company itself) to enter into a separate shareholders’ agreement. Shareholders’ agreements can be particularly useful where the parties wish to retain confidentiality (articles of association need to be filed at Companies House and their contents are therefore in the public domain; shareholders’ agreements generally don’t need to be filed at Companies House and their contents are therefore usually private). Also, shareholders’ agreement are often more “commercial” when compared with articles of association, which are often more corporate/mechanical in form and substance.

The lack of a shareholders’ agreement can give rise to numerous problems, including disputes between shareholders regarding the manner in which a company’s business is being operated. Having a shareholders’ agreement in place can assist a company’s shareholders in dealing with such problems and can be viewed as a vital step towards minimising the risk of potential shareholder disputes.

Preparing a shareholders’ agreement can be a complicated and time-consuming task. Great care needs to be taken so as to ensure that the agreement is compatible with, amongst other things, the relevant company’s articles of association and, where the agreement refers to what happens to the shareholders’ shares when they die, the shareholders’ wills. The best advice therefore is to plan carefully and get legal representation at an early stage.

At Debenhams Ottaway Solicitors, we have significant experience in advising healthcare professionals on a plethora of company-related matters, including producing and amending shareholders’ agreements and articles of association, assisting with the incorporation of companies and advising upon share purchase and sale arrangements and shareholder dispute matters.

If you wish to discuss your requirements with us, please do not hesitate to contact senior lawyer James Brawn, in our corporate and commercial law team.