CJCH Solicitors has published new guidance showing the legal foundations every small and medium-sized enterprise (SME) should consider, with a particular focus on the importance of entering into a shareholders’ agreement at an early stage. The guidance, authored by Seán Russell, Head of Corporate here at CJCH Solicitors, addresses a common gap that can leave businesses exposed when relationships or circumstances change.
Many businesses are built on trust, with friends, family members, and founders entering ventures focused firmly on growth. That optimism is often a driver of success, but it is also why some of the most important legal protections are overlooked until they are needed. By that point, the necessary conversations can be considerably more difficult.
A shareholders’ agreement is a private agreement between a company’s shareholders, described by Russell as “part business pre-nup and part business plan”. It sets out how the shareholders’ relationship will work, how decisions will be made, and what will happen if circumstances change. Critically, it works alongside a company’s articles of association, providing greater commercial detail and nuance while remaining private between the parties.
In his guidance, Russell explains that such agreements are not as common among SMEs as they should be, largely because it can feel uncomfortable to discuss what might happen if a shareholder leaves, stops contributing, wishes to sell, or disagrees with the company’s direction. However, these are precisely the conversations that are easier to have at the outset.
The guidance outlines several cases in which the absence of an agreement can create significant difficulties. These include the deadlocked 50-50 company, where two partners fall out with no agreed mechanism to resolve the impasse; the non-contributing shareholder who steps away yet continues to receive dividends; and succession planning within family companies, where the lack of clear rules can create tension in both the business and the family.
Russell emphasises that no two shareholders’ agreements should be identical, as each must represent the company, the personalities involved, the ownership structure and the direction of travel. Instructing the right solicitor is therefore essential, making sure the agreement is customised to the business rather than relying on a one-size-fits-all document. He further notes that an agreement should evolve over time, revisited as a company grows, takes on investment, or changes its structure, so that it remains fit for real-life purpose.
CJCH Solicitors provides full support to businesses through its Commercial Law team, advising on contracts, corporate structures, mergers and acquisitions, and dispute resolution.
The full article is available at Business News Wales here.
