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Company law FAQs Reading

How can I avoid a disputes between shareholders?

The best way to avoid a dispute is to have a well drafted shareholder agreement.  A well-drafted shareholder agreement will including details regarding the company’s business objectives, finances, policies with respect to dividends, details of directors fees and salaries, policies with respect to the authority required and procedures that need to be followed for shareholder to borrow or claim costs, and what will happen where a shareholder dies or decides to sell shares.

In short, the best way to seek to avoid a dispute between shareholders is to have a clear, well considered shareholders’ agreement. Amongst other things, a good agreement will cover:

I am considering a joint venture.  What should I take into account when drafting a joint venture agreement?

A well-drafted joint venture agreement will consider the general structure of the venture, the business objectives behind it, how the venture will be managed, the proportion of assets that will be contributed, the position on finance; how the venture will be managed as a whole, intellectual property issues (who will own what), the sharing of profits, the position on dispute resolution and how the venture will come to an end.

Are shareholders entitled to transfer their shares to others?

Whether they are allowed or not depends on the articles of association and any shareholders agreements.  Articles of association will commonly include provisions allowing directors to refuse the registration of transferred shares.

There are numerous other possibilities.  It can be expected that a large number of agreements will place restrictions on transfers stating that shares must be offered to existing shareholders first (legally known as pre-emption) or sold back to the company (share buy-back).  It is also probable that there will be provisions relating to how the value of shares will be calculated where shares are sold back to the company or transferred to existing shareholders.

It is also possible that shares could be transferred within families whilst transfers to others is restricted by a right of existing shareholders to pre-empt a sale or directors refusing to register transfers.

When can a company go into administration?

Companies are liable to go into administration where debts are not paid.  There are two legal routes that can be taken, the ‘out of court’ route and court route.  If an application is made out of court, only the company itself, the directors or holders of floating charges which qualify are entitled to make an application.  If an application to the courts is made, the company itself, directors or creditors can make an application.