First, there are public and private company shareholders. Despite both types of organisations having directors, managers, and shareholders, their interactions and responsibilities can differ.
Public company shareholders
There are often higher numbers of shareholders and investors in large companies and organisations, with very different roles: some directly involved with the business operation, and others purely motivated by their investment returns.
Private company shareholders
Smaller, private companies tend to have fewer shareholders. These are often directors with a direct role and responsibility to the operation of the business. Depending on the number of shares each holds dictates minority and majority shareholders. A Shareholder Agreement protects both types of shareholders, creating fairness throughout both business operation and control.
The Shareholder Agreement delivers regulations, providing security for those with less than 50% of the issued share capital from vulnerabilities. Without an agreement, it would be easier for majority shareholders to overrule minority shareholders during crucial decision-making and even buy them out against their will.
Majority shareholders may need protection against company directors if they don’t hold any board-level power or representation. Also, they may require legislation to manage shares when they want to sell or during disputes over ownership and allocation when minority shareholders are selling, forcing a majority shareholder into a disagreeable situation.
The above is intended as guidance only and does not substitute legal advice. Please browse our existing Shareholder services or get in touch with LegalDrop via our contact page if you need assistance.