A shareholders’ agreement is an agreement entered into by the shareholders of company which stipulates the respective rights and obligations of the parties. The agreement can regulate the shareholders voting rights, protect a minority shareholder`s interests and provide how a company is going to be run.
A shareholder’s agreement can also provide for other eventualities such as:
- dividend policy
- regulate the sale/transfer of of shares
- provide for deadlock situations and
- valuation of the shares.
It is usual for the terms of a shareholders’ agreement to be incorporated into the articles of association (“Articles”) of a Cyprus company.
A shareholders’ agreement provides a contractual remedy if its terms are breached. The Articles may provide a means to prevent a breach from occurring in the first place.
If a Shareholders agreement does not exist, any disputes between shareholders/ directors will be settled by what is provided in the Articles.
Reliance on the standard Articles alone may result in:
- a director being removed by the shareholders by an ordinary resolution;
- a change of the nature of the business;
- the articles being amended by the majority shareholders – this may result in any protection afforded to a minority shareholder in the articles being extinguished;
- deadlock occurring .
A well drafted shareholders’ agreements will contain provisions which pre-empt disagreements and sets out appropriate ways for disputes to be addressed.
Our firm is able to provide prompt, practical and authoritative legal advice on corporate governance and company law issues.
We can assist by advising and drafting a shareholders’ agreement to suit your needs. We can advice on the scope of remedies available in a situation where minority shareholders have been excluded from the company, are in some other way oppressed, or where the company’s affairs are carried out in a damaging manner for the company by the majority.
Theodorou Law is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law.
If you have a query or wish to receive further information, please contact us using [email protected]