A shareholders' agreement and the company's articles of association (Articles) are important constitutional documents for a company, particularly where there is more than one shareholder.
The documents both serve different purposes and have different legal implications.
However, together, they seek to govern the affairs and management of the company.
The Articles are required by the Companies Act 2006 (the Act) and, typically, will set out the rights attaching to the shares, as well as the management and administrative structure of the company.
Unlike a shareholders' agreement, the Articles are filed with Companies House and are available for public inspection online.
A company's articles typically also cover matters such as:
Conversely, a shareholders' agreement is a private contract between the shareholders of a company and is not a legal requirement.
It can, however, be a useful agreement to supplement the Articles with matters which are more appropriate for a private agreement.
Shareholders' agreements can cover any matters of the shareholder's choosing but will commonly provide for topics such as:
While shareholders have certain rights to enforce the Articles, the shareholders can act for their own benefit without considering other members.
Accordingly, a shareholders' agreement is useful for documenting matters which may require direct enforcement between the shareholders and the company.
A shareholders' agreement and Articles require careful consideration and will depend on the make-up of the shareholdings and management of the company.
If you would like to discuss your requirements in more detail, please let our Corporate lawyers know, and we would be happy to assist.
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