Right, so your shareholder agreements
really regulates the rights.
Let's take the step back there's three
purposes for a shareholders agreement.
The first is that it records and
regulates the finances and the
management of the company. The second
thing it does is it outlines the rights
responsibilities and duties of your
shareholders. The third thing it
does is it regulates the relationship
between the shareholders to the company
and the relationship between individual
shareholders.
There's plenty of shareholders
agreements on the internet that are
available. They do become problematic
if those shareholders agreements need to
be customized to a certain set of
circumstances. The ones on the internet
generally don't make sufficient
provision for if there's a dispute
between shareholders. It really is
encouraged and advised that
independent legal advice is you know
that is taken into account when those
agreements are drafted.
At the end of the day it entirely
depends on the attorney you go to.
The profession is based on an hourly rate
which is regulated by that attorneys
experience and their knowledge of the
industry. Generally, ballpark figure
you probably looking at between R46,000
PLUS VAT.
The biggest risk is what happens if
there's a fallout between shareholders.
You know my saying is you can't
unscramble an egg so prevention is
better than cure.
You need to make provision for instances
specifically, if there's only two
shareholders in the company that owns
50% of their company. What happens if
they can't reach an agreement? That's the
most important role or one of the most
important aspects of a shareholders
agreement, is that you can be very
specific in how that dispute is resolved
and more importantly who resolves
the dispute. The second important aspect
of the shareholders agreement is to make
sure what happens if one of the
shareholders dies, what happens if they
go insolvent, what happens if one
shareholder wants to sell their shares,
provision needs to be made to protect
the other shareholder. That's done by
means of what we call a right of
preemption, where the remaining
shareholders given the right to purchase
the shares from the shareholder that
wants to opt-out.
