In the article, Derick tackles the complex task of drafting a Shareholders Agreement after previously exploring the intricacies of drafting a Memorandum of Incorporation. This new challenge involves outlining the foundational governance aspects between shareholders and the company. With the assistance of Kevin, an expert in corporate governance, the article delves into the dual purpose of the Shareholders Agreement: firstly, balancing the interests of different shareholders, particularly in scenarios involving minority and majority stakeholders, and secondly, governing the relationship between the shareholders and the company itself.
Key provisions discussed include how the company will be capitalized, with a focus on shareholder loans, interest terms, treatment of excess contributions, and implications of a shareholder’s refusal to provide a loan. The article also addresses third-party funding, emphasizing the obligation of shareholders to provide security and detailing how this responsibility is distributed among them.
Dividend provisions are examined in the context of the Companies Act, 2008, with guidelines on the frequency and restrictions of dividend declarations, the percentage of profits distributed, and the process for modifying dividend policies.
The article explores the necessity of shareholder approval for the annual business plan and budget, stipulating the company’s operational parameters, and addressing the consequences of non-approval.
The formation and responsibilities of a remuneration committee are discussed, highlighting its role in balancing employee compensation with shareholder interests.
Finally, the article covers the rights of shareholders to company information and the accompanying confidentiality obligations, and restraint provisions like non-competition clauses to protect the company’s interests. The article concludes by indicating that future discussions will focus on the relationships between different shareholders, including provisions like pre-emptive rights, drag and tag-along provisions, and buy and sell arrangements.
