BVCA Model Shareholders Agreement: What You Need to Know
The BVCA (British Private Equity & Venture Capital Association) Model Shareholders Agreement is a widely recognized and respected standard agreement that details a range of common arrangements between shareholders in a company. It is a legally binding agreement that helps ensure all parties are in agreement when it comes to key aspects of the company`s governance and operation.
When it comes to setting up a new company or making changes to an existing one, a shareholders agreement can help set the foundation for a successful and cohesive business. This is particularly relevant for startups that are likely to involve multiple owners and investors.
In this article, we`ll take a closer look at the BVCA Model Shareholders Agreement, what it covers, and why it`s important for companies to have one in place.
What is the BVCA Model Shareholders Agreement?
The BVCA Model Shareholders Agreement is a sample agreement that covers a range of issues typically encountered by companies with multiple shareholders, such as:
– Shareholder rights and obligations
– How company decisions are made
– Board composition and voting
– Share transfers and sales
– Exit provisions and restrictions
– Shareholders` use of confidential information
The agreement is designed to provide a balanced framework for shareholders to work within, and to help avoid disputes and misunderstandings that can arise when multiple parties are involved in a business.
Why Use the BVCA Model Shareholders Agreement?
There are several reasons why companies might choose to use the BVCA Model Shareholders Agreement:
1. Saves time and money: The BVCA Model Shareholders Agreement is a pre-existing document that can be customized to meet specific needs. This can save time and legal costs when compared to drafting a new agreement from scratch.
2. Helps provide structure: The agreement sets a clear framework for the operation of the company and the rights and obligations of shareholders. This can help prevent misunderstandings and disputes from arising.
3. Demonstrates professionalism and credibility: The BVCA Model Shareholders Agreement is a widely recognized and respected industry standard. Using it can help demonstrate that a company is a serious and credible business.
4. Provides flexibility: While the agreement covers a range of topics, it can be customized to the specific needs of the company and its shareholders. This allows for flexibility and tailoring to the unique situation.
Important Provisions in the BVCA Model Shareholders Agreement
While the BVCA Model Shareholders Agreement covers a wide range of topics, there are a few key provisions that companies should pay particular attention to:
1. Decision making: The agreement should outline how company decisions are made, including the role of the board of directors and voting procedures for shareholders.
2. Share transfers: The agreement should detail how shares can be transferred or sold, including any restrictions or conditions.
3. Confidentiality: The agreement should specify how confidential information is to be handled by shareholders and the consequences of any breaches.
4. Exit provisions: The agreement should cover how shareholders can exit the company, including any rights of first refusal or drag-along provisions.
The BVCA Model Shareholders Agreement is a widely recognized and respected industry standard for companies with multiple shareholders. It provides a framework for governance and operation that can help prevent misunderstandings and disputes from arising. By customizing the agreement to their specific needs, companies can create a structure that works for them while still adhering to industry standards. Ultimately, having a shareholders agreement in place can help companies operate more cohesively and with greater clarity.