Shareholders' Agreement Checklist

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Shareholders' Agreement & Articles Checklist

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Shareholders' Agreement & Articles | Checklist

Shareholders' Agreement & Articles Checklist When shareholders are setting up and/or investing in a company, there are various rights and protections they may want or need.

These rights and protection should be set out in a shareholders’ agreement (a private document only available to those who are party to it) and the company’s articles of association (part of the company’s constitution, which is required to be filed at Companies House so that it can be accessed by the public).

The below is a list of issues that the shareholders of a company may wish to consider for the basis of a shareholders’ agreement and articles of association.

John Egan Associate Partner | Corporate john.egan@laytons.com +44 (0)20 7842 8000

Kathryn Beasley Solicitor | Corporate kathryn.beasley@laytons.com +44 (0)20 7842 8000

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Shareholders' Agreement & Articles | Checklist

Company Details Existing issued shares Existing shareholders Proposed new shareholders

Full name(s) and address(es):

(if any) Number of shares: Price per share: Business description

Board Directors (now) New Directors (if any) Right of any shareholders to

Yes/No

be directors If yes, which shareholders will have the right?

If yes, will there be a minimum % shareholding required to have board representation and if yes what %?

If yes, will those shareholder directors also be employees? If yes, will their right continue if the shareholder ceases to be an employee?

If yes, will the right be given to named directors only as opposed to a future holder of shares? e.g. transfer of shares on death

Regularity of Board meetings Monthly/quarterly?

Notice period for board meetings? At least 5 days?

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Shareholders' Agreement & Articles | Checklist

Board Quorum for Board meetings

Select one:

2 directors Other (if so, please stand)

Chairman (if any) Chairman casting vote

Yes/No

Board decisions

Simple majority?

Shares Class and nominal value Voting rights

1 vote per share

Dividend rights

in proportion to shareholdings

Right to capital on exit

in proportion to shareholdings

Rights to capital on a return

in proportion to shareholdings

of assets or liquidation Share Option Pool

Will a proportion of the Company’s diluted share capital be set aside for granting share options to incentivise employees?

Dividend Policy Any specific dividend policy?

Yes/No

Dividend policy details

It is the intention to distribute

% of distributable profits.

Timing of distribution to be specified? e.g. within 3 months of year end?

Ability to pay interim dividends?

Other details? e.g. period of time when no dividends paid; certain liabilities to before repaid before any dividends.

If yes, will the right be given to named directors only as opposed to a future holder of shares? e.g. transfer of shares on death

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Shareholders' Agreement & Articles | Checklist

Rights to information Accounts

Yes/No, right to see unabbreviated annual accounts If yes, within

Management Accounts

months of year end.

Should these be provided to shareholder, Yes/No? Frequency?

Any other specific information

Yes/No

Matters requiring consent Matters requiring consent

Are there certain matters that require consent to be given by others before the Company/Board can carry out those matters?

Monetary values

Will transactions or contracts over a certain value require the consent of others before the Company/Board can enter into them?

Level of consent required

Board Approval OR Shareholder Consent? e.g. 75% of A shares OR All shareholders OR Mixture

Employment Contracts New service agreements

Yes/No

or employment contracts required?

Undertakings to be given Work exclusively for Company Yes/No (if No, please provide details): Promote best interests of

Yes/No

Company Ensure all business

Yes/No

developments go through Company Duty not to disclose confidential information

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Yes/No

Shareholders' Agreement & Articles | Checklist

Restrictive covenants Applicability

All shareholders?

Non-compete

Yes/No

Non-solicitation restriction of Yes/No customers, clients, suppliers, agents or distributors Non-solicitation of

Yes/No (If yes – All employees? OR Key employees?)

employees Duration

Whilst party is a shareholder/director/employee/consultant – Yes. PLUS months after party ceases to be shareholder/director/employee/consultant.

Issue of new shares Pre-emption rights

Yes, so new shares are offered to shareholders in proportion to shareholdings before issue.

Exclusion of pre-emption

Yes, if approval by:

right

• • •

special resolution (75%)? shareholders together holding the shares? other

% of

Transfer of shares Transfer Restriction

Yes/No

Pre-emption rights

Yes, so shares are offered to existing shareholders in proportion to shareholdings before transfer.

Exclusion of pre-emption

Yes, if approval by:

right

• • •

Drag along rights

special resolution (75%)? shareholders together holding the shares? other

% of

Yes/No. If holders of

% of the Shares agree to sell they can compel the

remaining shareholders to sell their shares on the same terms.

Tag along rights

Yes/No. If holders of

% of the Shares agree to sell they can compel the

remaining shareholders to sell their shares on the same terms.

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Shareholders' Agreement & Articles | Checklist

Compulsory share offer Good Leaver/Bad Leaver

Will there be Good Leaver and Bad Leaver provisions requiring a shareholder to transfer their share if they leave? Yes/No Consider in what circumstance you would like to class a shareholder as a Good Leaver, and those as a Bad Leaver. To incentivise shareholders to stay, should they be automatically classed as Bad Leavers if they leave within a certain time period?

Applicability of compulsory

All shareholders? Yes/No

transfers Exclusion of compulsory offer

No/Yes by board resolution/shareholder majority?

Bankruptcy

Trigger compulsory transfer? Yes/No

% of shares?

Applicable to all shareholders? Yes/No Number of Shares

Should all the Shares have to be transferred, or just a proportion?

Price

Bad Leaver – shares to be offered at nominal value or issue price Good Leaver – shares to be offered at fair value

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Shareholders' Agreement & Articles | Checklist

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