Lawyers Leicester

SMALL BUSINESS FAQS – LEICESTER SOLICITORS

What legal issues should I could when starting a business?

For some types of business (businesses which involved taking care of others) might require a license.  You may also need to search for premises and negotiate an appropriate lease suitable for your business requirements. You should also carry out a health and safety assessment, draft contracts of employment and take out employment liability insurance if you have employees, draft standard terms of trading and register with the PAYE office.

Intellectual property is a particularly important consideration.  Intellectual property allows businesses to maintain competitive advantages.  You might, for example, want to register trade marks which allow customers to identify your business and build up your brand and reputation.

What are shareholder agreements?

A shareholder agreement is an agreement between shareholders which states how the company is to be run and how shareholders with different share holdings will be protected.  Typically, this will mean protecting minority shareholders from majority shareholders taking decisions which unfairly cause detriment to other shareholders.

What kinds of provisions will typically be included in an agreement to protect minority shareholder interests?

Majority shareholders can have wide-ranging powers in the absence of an agreement.  They can remove and appoint directors, vote for themselves to receive salaries and create more shares so as to lessen the powers that any existing shareholders have.  Therefore, a shareholder’s agreement will typically provide safeguards against circumstances like this and state that majority shareholders can only make certain decisions if there is consent from all the shareholders or from a certain class of shareholder.

What rights do shareholders typically have in shareholder agreements?

Shareholders usually do not have a right to be a director.  Directors, will typically have the right to make management decisions amongst themselves.  However, special circumstances outlined in an agreement may warrant shareholder agreement.  If, for example, the directors wish to radically change the nature of the business, enter into contracts in which they have a personal interest or borrow more than agreed limits, shareholders may be entitled to have a say.  Please bear in mind that what is and is not possible is often defined by the agreement itself.

How can shareholder agreements dictate how shares are transferred?

Shareholder agreements will typically place restrictions on share transfers.  There are several possibilities.  Other shareholders may have a right of pre-emption, which gives remaining shareholders an option to buy the shares.  Transfers may require consent of a certain class of shareholders or all the shareholders.  There may also be a restriction stating that transfers can be made within a family.  In any case, if the rules are broken, the directors may be entitled to not register any transfer which will make it invalid.

What else will shareholder agreements cover?

There will usually be provisions stating how the board should come to decisions, how directors are appointed, the procedures for resolving disputes, how the company is financed, when and how dividends will be paid out and what happens when a shareholder dies.  There may also be rules that prohibit shareholders from competition directly with the company, dictate how family members can be employed within the company and prevent confidential and sensitive commercial information being leaked (subject to the requirements of the Public Disclosure Act 1998).