In The Bahamas, shareholders can reach an agreement as to the affairs of a company or international business company. These agreements have certain effects on the company if they are unanimous.
What Is a Shareholders’ Agreement?
A shareholders’ agreement is a concurrence of some or all of a company’s shareholders on an issue affecting the company. Shareholders have ownership interests in the company, so they have decision-making power as to the company’s affairs. Directors and officers, however, oversee the day-to-day operations and decision-making of the company. A shareholders’ agreement usually concerns a big-picture issue or procedure that affects many smaller decisions for the company as a whole.
What Kinds of Issues Do Shareholders Agree Upon?
Shareholders can decide to form a unanimous shareholders’ agreement to restrict company directors from making specific decisions without consent of the shareholders. International Business Companies Act, Section 41(1). The decisions might include selling significant company assets, buying expensive real estate, or entering into valuable contracts. Without a shareholders’ agreement, directors generally would have the authority to make these types of decisions – as long as they had no conflicts of interest and the decisions have a reasonable basis.
What Are the Downsides of Making a Shareholders’ Agreement?
Shareholders’ agreements have one major downside for shareholders. As to the subject of the shareholders’ agreement, each of the shareholders assume all the rights, powers and duties and incur all the liabilities that a director of the company would. In other words, the shareholders step into the shoes of directors for the purposes of whichever powers of the directors the agreement restricts. In turn, the directors are relieved of duties and liabilities as to those powers. International Business Companies Act, Section 41(2).
Tips for Preparing a Shareholders’ Agreement
If you want to prepare a shareholders’ agreement to restrict some rights, powers, or duties of directors, you should put it in writing. The agreement should be very specific about what it restricts (so that shareholders do not become liable for other items). Consider speaking to a business lawyer about specific legal terms to include in the agreement to protect you and other shareholders.
To find out more about shareholders’ agreements in The Bahamas, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.
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