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What Is A Shareholders Agreement?
What Is A Shareholders Agreement?
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Shareholders Agreement
Confidentiality– Shareholders Agreement is also a document for private viewing and can
include a wide range of matters which the shareholders don’t want to be made publicly
available such as dividends policy, shares valuation, restrictive covenants, etc. Unlike the
Constitution which needed to be lodged with the Companies Commission of Malaysia
(“CCM”), there is no requirement to lodge a Shareholders Agreement at CCM, so the
contents of the Shareholders Agreement can remain confidential.
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When a Company has more than one shareholder, or in joint ventures and investment
situations, it is strongly advisable to have a Shareholders Agreement.
Yes and no. ‘Yes’, because you will be able to find templates online. ‘No’, because none of
those templates have been prepared with your business, size of the company,
shareholding structure, etc in mind. Consequently, if you use a template, the document is
unlikely to give you the rights and protections you might need or want, and may do quite
the opposite.
Shareholders may include a clause in the Shareholders Agreement which states that the
Shareholders Agreement will supersede the Constitution to the extent of any conflict.
However, such Shareholders Agreement is not binding upon the Company unless the
Company is made a party thereto.
A Shareholders Agreement is valid once it is signed by all the parties even if it is not
stamped. But the Shareholders Agreement cannot be adduced as evidence in court unless
and until it is stamped.
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Typically, a Shareholders Agreement will include a clause which states that amendment is
allowed if all shareholders consent to that amendment.
company.
Shares valuation- Provisions can be made for share valuations in the event that a
Shareholder wishes to exit the business. This reduces the potential for conflict and any
dispute.
Dividend Policy- The manner in which the Company should declare its dividend. It is
important that any dividend policy does not have a negative impact on the cash
reserves of the business.
Tag Along- Right of minority shareholder to tag along when a majority shareholder
sells its shares to a third-party buyer. This enables the minority shareholder to sell on
the same terms as the majority shareholder.
Confidentiality- Obligation to keep information relating to the Company confidential.
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