We take a look at the importance of a shareholders’ agreement and what to include in one
A shareholders’ agreement is a limited company’s equivalent of a partnership agreement. Where more than one shareholder is involved in a company, such an agreement is useful in regulating the way the business is to be conducted, dealing with any disputes or unexpected events that arise, as well as providing protection for the shareholders’ investment and establishing a fair relationship between the shareholders.
It is not mandatory for a company to have a shareholders’ agreement as it does not need to be filed in the public domain, but for the reasons stated above, it is highly recommended. There are many advantages of a shareholders’ agreement including:
Practitioners operating via a corporate structure may encounter such issues themselves or in the businesses they serve and would be well placed to ensure not only that a formal shareholders’ agreement exists but also that it adequately deals with all the matters.
As a follow-up to our previous factsheet on partnership agreements, ACCA has brought you a factsheet on the importance of a shareholders’ agreement and a helpful checklist of matters to include in one.
As always, practitioners should also review and ensure that letters of engagement are up to date to avoid any misunderstandings of the matters the accountant is responsible for and what matters the client should take responsibility for.
ACCA’s updated engagement letter templates should be used and can be adapted to fit a wide range of service offerings.