On a transaction involving a Shareholders’ Agreement, alongside the Shareholders’ Agreement and the Articles, lawyers may be involved in drafting various additional documents as discussed below. This is not an exhaustive list and neither are they all required in all circumstances.
Please also note that some of these documents may also be required even when there is only one shareholder, but they are most common in the context of companies with two or more shareholders.
Management Agreement
These are sometimes used in companies where one of the shareholders agrees to be responsible for the day to day management of the business. Such an agreement would be likely to cover the following issues:
1. the manager’s role;
2. limits on the manager’s powers;
3. any fee payable to the manager; and
4. provisions for terminating the manager’s role.
Asset/Business Purchase Agreement
The parties may be contributing parts of their existing business to the company or the company may be acquiring a business or assets from a third party. In either instance the transaction will be documented by a purchase agreement.
Such an agreement may include warranties in relation to the business or assets to be acquired. If there are, this might allow the company a right of recovery if the business or assets turn out to be less valuable than warranted or subject to an undisclosed liability. We will look at warranties in more detail in the Acquisitions zone later in the module.
Secondment Agreement/Employment Agreements
If directors and senior management are seconded from the shareholders (if they are themselves businesses or companies), it is important to decide whether the company or the shareholders will be responsible for their remuneration. A Secondment Agreement would cover these issues.
Any employees of the company would require employment contracts.
Intellectual property licences
As part of their contribution, the shareholders may license intellectual property rights to the company and/or it is possible that the company will agree to license back to the shareholders any intellectual property which it develops.
Contracts for the supply of goods and services
It may well be that the shareholders are to supply goods and/or services (other than those already mentioned above) to the company, in which case issues such as the price and other terms of such goods/services will need to be determined and documented.
Guarantees
Third parties such as banks may require the shareholders to provide guarantees in relation to the company’s obligations.