This would have prevented unknown third parties from acquiring shares in a company with existing shareholders. We regularly advise shareholders and companies on shareholder contracts and we would love to have a free and non-binding chat with any reader who wants to discuss how we can help them. This can create a problem if an existing shareholder sells his shares and the new shareholder does not want to sign the shareholder contract. To combat this problem, many shareholder agreements contain a clause requiring existing shareholders to ensure that anyone buying their shares signs an act of membership. A membership instrument is a document stipulating that the new shareholder agrees to be bound by the content of the shareholders` pact. 4) Unlike a statute that is a public document made available to The Companies House, the shareholders` pact remains private and confidential and cannot be accessed by others, such as creditors or non-members. In the case of the formation of a company of two or more shareholders, a shareholders` pact is a central consideration. While this is not a legal obligation, their purpose is to continue to regulate the way in which shareholder transactions are managed. It is very different from partnerships. In the absence of a partnership agreement, partners can invoke the provisions of the Partnership Act of 1890. The same is not true for shareholders. The reality is that shareholders sometimes leave for different reasons.
A well-developed shareholder pact can help ensure that the issue remains consensual. When a shareholder wishes to withdraw, current shareholders may apply restrictions on the outgoing shareholder`s ability to create a competing business. Such restrictive alliances can be invaluable in protecting the company`s interests. Some people with a shareholder pact will never have to rely on that, but there will be many more cases where shareholders would like them to have taken the time to reach a formal agreement. A minority shareholder may require a provision that implies that if a person agrees to buy the shares of a majority shareholder, a shareholder can only sell the shares if the same offer is made to all shareholders, including the minority shareholder.