Shareholder Agreement With One Shareholder

A non-compete clause prohibits shareholders from competing with the group while they own the group and for a short period after leaving the group. In a small business, customers work closely with shareholders. A non-compete clause prevents an influential or former shareholder from attracting customers out of the group. A shareholder who leaves the group may also have confidential information that can be used to the benefit of the group. Over time, the personal circumstances of each shareholder can change significantly. This can have a huge impact on the transaction in the absence of a shareholders` pact. For example, the shares of a capital company are considered assets, so that after the death of a shareholder, the deceased`s shares become part of their estate and are subject to the will of the deceased. In other words, in the absence of a shareholder pact dealing with a shareholder`s shares after the death, the spouse or children of the deceased could, overnight, become your new business partner – a scenario that may not be desirable for other shareholders. A mandatory repurchase provision may be included in the shareholder contract, which provides that if a shareholder dies, the other shareholders or the company are forced to purchase the shares of the deceased and the executor or manager of the estate is required to sell the shares.

In addition to the repurchase provision, a share valuation mechanism can be agreed and included at the time of the shareholder`s death. 4. determine what happens in the event of a shareholder`s death, retirement, etc. (with the value of the shares to be calculated according to a specified formula); Although the shareholders` agreement is a private document and does not normally have to be filed with Companies House, the articles, if there are provisions of the agreement that are inconsistent with the provisions of the company`s statutes, must be amended to be consistent and work with the provisions of the agreement.