What Is The Difference Between A Shareholders Agreement And Articles Of Association

15/10/2021

When a person buys new shares in a limited liability company, these new shareholders are automatically bound by the articles of association of that company and must therefore retain them. 1. The articles of association are public documents and every member of the public has the right and may consult their content at any time. In comparison, the shareholders` agreement is a private agreement between the parties involved, and no third party has the right to consult it. The articles of association and any amendments thereto must be entered in the commercial register, as they are published publicly. The loss of privacy must be weighed against the benefit that third parties may be aware of the laws. As a rule, shareholder agreements are signed by all shareholders of the company at the time of conclusion of the contract and concluded for the benefit of the members – not for the benefit of the company. This short article is intended to give an overview of some of the key areas often covered by these two documents, some of the differences between them, and how the two interact. While everything is often harmonious between shareholders when you start your involvement in a company, unexpected events can often lead to disagreements between the parties. A shareholders` agreement aims to provide a mechanism to resolve disputes and avoid uncertainty in the future. Even if it doesn`t seem necessary in the first place, a shareholders` agreement will serve as your insurance policy for the future and even if there is no litigation in the future, it will be a useful tool to regulate the participation of the parties in the company. We can prepare your will in such a way that it determines in a tax-efficient way what happens to your shares and other assets at the time of your death.

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