MAKE YOUR FREE Shareholders' Agreement

SHAREHOLDERS' AGREEMENT

THIS AGREEMENT is made:

BETWEEN

1. the individuals listed in Schedule 1 (the Existing Shareholders);
2.  , a company incorporated in  with registered number  whose registered office is at ,    (the Company).

BACKGROUND

1. The Company is a private limited company incorporated in .
2. The Company has an issued share capital of  shares of £.
3. The Existing Shareholders are the registered holders of the number of shares in the Company set out opposite their names in Schedule 1.
4. This Agreement sets out how the parties have agreed to manage the affairs of the Company and the relationship between them as shareholders.

The Existing Shareholders agree that:

MEANINGS

1. When used in this Agreement these words and phrases have defined meanings:

   Act	Companies Act 2006;
   Annual Business Plan	a plan prepared by the Board for each Financial Year outlining the Company's proposed objectives, containing cash flow projections and an operating budget for that Financial Year;
   Articles	the articles of association of the Company as amended or replaced;
   Auditors	the Company's auditors or accountants;
   Bank	the Company's bankers as appointed from time to time;
   Board	the Company's board of directors;
   Business	the profession, trade or business of  to be carried on by the Company or any other business decided in line with this Agreement;
   Business Day	a day other than a Saturday, a Sunday or a public holiday in England and Wales;
   Business Hours	from :   to :  ;
   Confidential Information	all information of a confidential nature concerning the Company, a Shareholder (or former Shareholder) or their respective businesses (including details of customers, clients, suppliers, plans, intentions, market opportunities, operations, processes, product information, know-how, designs, trade secrets or software) and the terms of this Agreement;
   Clear Days	in relation to a period of notice or other communication, that period excluding the day when the notice or communication is given and the day it takes effect;
   Director	a Director of the Company;
   Distributable Profits	the amount of the Company's profits available for distribution to Shareholders under the Act;
   Expenditure Limit	£ ;
   Financial Year	the Company's financial year for accounting purposes;
   Intellectual Property	all patents, rights to inventions, copyright and neighbouring and related rights, moral rights, trade marks, service marks, business and domain names, goodwill, rights in designs, rights in computer software, database rights, confidential information (including trade secrets and know-how) and all other intellectual and industrial property and similar rights, whether registered or unregistered, and including (a) all renewals or extensions of these rights and (b) all applications and rights to apply for and be granted these rights which subsist in any part of the world;
   Leaving Date	the date a Shareholder stops being a Shareholder;
   Leaving Shareholder	a Shareholder who transfers their Shares and stops being a Shareholder;
   Model Articles	the articles of association contained in Schedule 1 to the Companies (Model Articles) Regulations 2008;
   Reserved Matters	any matter referred to in the Reserved Matters section of this Agreement;
   Shareholders
   Shares	ordinary shares of £  each in the capital of the Company; and
   Start Date	.

2. In this Agreement, unless the context means a different interpretation is needed:
   1. including means "including without limitation";
   2. words denoting the singular include the plural and vice versa, and words denoting one gender include all genders;
   3. a person includes firms, companies, government entities, trusts and partnerships;
   4. a party means a party to this Agreement and includes its assignees and successors in title and, in the case of an individual, to their estate and personal representatives;
   5. reference to a Section, paragraph or Schedule is to a Section, paragraph or Schedule of or to this Agreement (and the Schedules form part of this Agreement);
   6. reference to a statute or statutory provision includes any modification of or amendment to it, and all statutory instruments or orders made under it;
   7. reference to the time of day is to a time in London; and
   8. reference to writing or written includes faxes and email but not any other type of electronic communication.
3. The headings in this document are for convenience only and do not affect the interpretation of this Agreement.

PRELIMINARIES

Start and Duration

1. This Agreement:
   1. takes effect on the Start Date;
   2. will continue in effect until the Company's winding up begins; and
   3. will bind each Shareholder as long as they continue to be a Shareholder, but subject to the Miscellaneous section below.
2. The Company will carry on the Business and continue until wound up in line with the Act.

Administration

1. The Directors of the Company will initially be the individuals listed in Schedule    
2. Unless otherwise agreed by the Board:
   1. the registered office of the Company will be ,   ;
   2. the Business will initially be carried on from   ,   ;  and
   3. the Auditors of the Company will be   such auditors or accountants as may be appointed by the Board in any Financial Year.

Articles of Association

1. On the Start Date, the Company's Articles are the Model Articles.

Warranties

1. Each Shareholder warrants to the other Shareholder that they can accept and perform their obligations under this Agreement without being in breach of any other obligation they are bound by.

ACCOUNTING AND FINANCIAL MATTERS

Accounting

1. The accounting reference date of the Company will be the  of  in each year.
2. The Company must maintain complete and accurate accounting and other financial records giving a true and fair view of the Business, the state of affairs and the profit and loss of the Company.
3. The accounting and other financial records will be kept at the Company's registered office or principal place of business (or any other place the Board decides) and will be open to inspection by the Directors during Business Hours on Business Days.

Banking Arrangements

1. The Bank is the Company's banker as appointed from time to time.
2. The Company's bankers will be the Bank.
3. All money and payments received by or on behalf of the Company must be paid promptly into the Company's bank account and all securities for money must be promptly deposited in the Company's name with the Bank.
4. All cheques or instructions for the electronic transfer of money from any account of the Company with the Bank must be in the Company's name and can be drawn or given:
   1. for amounts up to and including the Expenditure Limit, by any one Director; and
   2. for amounts over the Expenditure Limit, by two Directors.

   In the case of instructions for electronic transfer, written confirmation of those instructions will be signed by the authorising Director(s).

Funding

1. No Shareholder will be obliged to subscribe for additional shares in the Company or provide additional funding to the Company (other than Shares they have agreed to).
2. Additional funding required by the Company will be borrowed from the Bank or from other normal sources on terms agreed in writing by all the Shareholders.
3. If a loan is not available on terms acceptable to all the Shareholders, any funds advanced to the Company by any Shareholder will be a loan on terms to be agreed with the other Shareholders. Any loan made to the Company by a Shareholder will be interest-free and unsecured unless otherwise agreed by all the other Shareholders.
4. Any guarantees or indemnities given by the Shareholders for obligations of the Company must be given jointly and severally by all the Shareholders.

Dividend Policy

1. No dividend will be declared or paid to any Shareholder while any loans from any Shareholder are outstanding.

SHARES

Issues of Additional Shares

1. If the Company wishes to issue Shares in addition to those provided for in this Agreement, the Shareholders will ensure (as far as lawfully possible) that the Company gives notice to each Shareholder stating the number of Shares to be issued and the issue price per Share (the Issue Notice).
2. Each Shareholder can (but is not obliged to) subscribe at the price stated in the Issue Notice for a number of Shares in proportion to their existing shareholding. The option must be exercised by notice to the Company at any time within 15 Business Days following the Issue Notice accompanied by payment for the Shares.
3. The Company can issue as it sees fit any Shares referred to in the Issue Notice that the Shareholders do not take up as long as the issue is completed within 25 Business Days after the Issue Notice.
4. If Shares are to be issued to any person not already a Shareholder, the issue will not happen until the proposed Shareholder has signed a deed of adherence agreeing to be bound by this Agreement from the date they become a Shareholder.

Transfer of Shares

1. No Shareholder can sell or transfer any Share (or any interest in any Share) except in line with the following paragraphs.
2. A Shareholder can transfer all or any of their Shares (or any interest in any Share) with the written consent of all the other Shareholders.
3. Unless they have the consent of all the other Shareholders, a Shareholder who wishes to transfer any of their Shares (the Seller) to another person must give written notice (a Seller's Notice) to the Company and the other Shareholders (the Continuing Shareholders). Each Seller's Notice must state the number of Shares the Seller wishes to transfer (the Sale Shares), details of the person they intend to transfer the Sale Shares to, the proposed price per Sale Share (the Sale Price) and any other specific terms.
4. Each Continuing Shareholder can (but is not obliged to) apply to buy any number of the Sale Shares at the Sale Price and on any other specific terms stated in the Seller's Notice. The option must be exercised by notice to the Company at any time within 15 Business Days of the Seller's Notice.
5. If there is competition between the Continuing Shareholders for the Sale Shares, the Sale Shares will be treated as offered to the Continuing Shareholders who accepted in proportion (as nearly as possible) to their existing holdings of Shares (the Proportionate Allocation).
6. A Continuing Shareholder can indicate they would be willing to buy a particular number of Shares in excess of their Proportionate Allocation (Extra Shares) when applying for Sale Shares.
7. The Company will allocate the Sale Shares as follows:
   1. if the total number of Sale Shares applied for by the Continuing Shareholders is greater than the available number of Sale Shares:
      1. each Continuing Shareholder will be allocated their Proportionate Allocation or (if less) the number of Sale Shares they applied for; and
      2. Extra Shares will be allocated in line with the applications or, if there is competition for the Extra Shares, among the Continuing Shareholders applying for Extra Shares in proportion (as nearly as possible) to their existing share of all the issued Shares of the Company excluding the Sale Shares; or
   2. if the total number of Sale Shares applied for by the Continuing Shareholders is equal to or less than the available number of Sale Shares, each Continuing Shareholder will be allocated the number applied for in line with their application and any remaining Shares can be sold to the intended buyer set out in the Seller's Notice.
8. After allocating the Sale Shares, the Company must give notice in writing (a Sale Notice) to the Seller and to each person that Sale Shares have been allocated to. The Sale Notice must state the number of Sale Shares allocated to each person and the price payable. Completion of the transfer of the Sale Shares in line with the Sale Notice will happen within five Business Days of the date of the Sale Notice.
9. If Shares are to be transferred to any person not already a Shareholder, the transfer will not happen until the proposed Shareholder has signed a deed of adherence agreeing to be bound by this Agreement from the date they become a Shareholder.
10. The Board will approve for registration any transfer of Shares which complies with this Section and all other applicable laws, rules and regulations, and decline to approve for registration any other transfer of Shares.

Compulsory Transfer

1. A Shareholder will be deemed to have served a valid Seller's Notice relating to all of their Shares
   1. if that Shareholder:
      1. dies;
      2. becomes a patient under the Mental Health Act 1983 or 2007;
   2. if that Shareholder:
      1. commits persistent breaches of this Agreement;
      2. is also a Director or employee and has their directorship or employment terminated due to their dishonesty, gross misconduct or neglect, fraud or illegal activities or any other ground for summary dismissal (other than in circumstances of proven unfair dismissal).
2. The Seller's Notice will be deemed to have been given to (and received by) the Company and the other Shareholders on the day the event occurred. The Sale Price will be taken to be:
   1. the fair value of the Shares where the event triggering the Seller's Notice is mentioned in paragraph (a) immediately above; and
   2. the fair value or nominal value of the Shares (whichever is less) where the event triggering the Seller's Notice is mentioned in paragraph (b) immediately above.

   The procedure set out in the Transfer of Shares section above then applies.

Share Valuation

1. The fair value of any Sale Shares referred to in the above paragraph will be the amount the Auditors (or an independent accounting firm engaged for this purpose if auditors or accountants have not otherwise been appointed) determine is, in their opinion, the fair value of those Sales Shares on the date of the notice exercising an option to apply for Sale Shares:
   1. between a willing buyer and a willing seller contracting on arm's length terms;
   2. assuming the Company will continue carrying out the Business; and
   3. ignoring that the Sale Shares represent a minority or a majority interest in the Company.

MANAGEMENT

The Board

1. Any question arising at any meeting of the Board, other than Reserved Matters, will be decided by a majority of votes of the directors present.
2. The Board can decide matters by written resolution of all the Directors and can establish committees in line with the Articles.
3. Meetings of the Board will be held at least  times a year.
4. Unless otherwise agreed in writing by all the Directors, at least 14 Clear Days' notice of each meeting will be given to all the Directors.
5. Each meeting notice will specify the time, date and venue of the Board meeting and will outline the matters to be discussed. No matters will be resolved at any Board meeting except those specified in the meeting notice unless all the directors agree otherwise.
6. Directors can attend a Board meeting by telephone or video conferencing unless the Articles say otherwise.
7. The quorum for each Board meeting will be    Directors present (in person or by telephone or video conferencing). If a quorum is not present within 30 minutes of the time appointed, or if during a meeting a quorum is no longer present, the meeting will be adjourned to the same time and place on the seventh day after the original meeting. If a quorum is not present at the adjourned meeting within 30 minutes from the time appointed, the adjourned meeting will be dissolved.
8. Minutes of each meeting will be prepared, approved by the Directors at the next meeting and signed by the chairman as evidence of the proceedings.

Shareholder Meetings

1. Any question arising at a Shareholder meeting will be decided in line with the Articles.
2. The Shareholders can decide matters by written resolution of all the Shareholders eligible to vote on the resolution to be proposed.
3. All voting of the Shareholders will be by a show of hands of those Shareholders present and entitled to vote on the resolution, unless a poll vote is requested. A poll vote can be demanded by:
   1. the chairman of the meeting;
   2. at least two Shareholders entitled to vote on the resolution; or
   3. Shareholders holding not less than 10% of the issued share capital.
4. Shareholder meetings will take place when requested by any of the Directors or Shareholders. Unless otherwise agreed in writing by all the Shareholders, at least 14 Clear Days' written notice of the meeting will be given to all the Shareholders entitled to attend and vote.
5. Each meeting notice will specify the time, date and venue of the meeting and will outline the matters to be discussed.
6. The quorum for each Shareholder meeting will be  Shareholders present. If a quorum is not present within 30 minutes of the time appointed, the meeting will be adjourned to the same time and place on the seventh day after the original meeting. If a quorum is not present at the adjourned meeting within 30 minutes from the time appointed the adjourned meeting will be dissolved.

Day-to-Day Management

1. The Directors will be responsible for the day-to-day control, policy and direction of the Company. The Directors will perform the duties delegated to them by the Board and report to the Board as required by the Board.
2. The Business and affairs of the Company will be managed by the Board and decisions will be decided by a majority vote except as specifically stated in this Agreement.
3. The chairman of the board will  have a casting vote.
4. The Directors will prepare an Annual Business Plan for each Financial Year.

Reserved Matters

1. The Shareholders must ensure as far as lawfully possible that the Company does not do any of the following without the consent of all the Shareholders (either obtained at a Shareholder meeting or in writing):
   1. change the Articles;
   2. stop being a private company limited by shares;
   3. change the Company's name;
   4. change the nature or scope of the Business;
   5. carry out the Business other than in the ordinary course of business on an arm's length basis;
   6. change the Company's accounting reference date;
   7. pass any resolution or take any action for the winding up, administration, receivership, dissolution or liquidation of the Company;
   8. carry out any reconstruction or amalgamation, enter into any scheme of arrangement or make any arrangement with its creditors generally;
   9. borrow, increase the level of any overdraft facility or obtain any other finance;
   10. create or grant any mortgage, encumbrance or other security over the whole or any part of its assets (other than liens in the ordinary course of business);
   11. lend money to any person;
   12. guarantee the debts of any person;
   13. sell or dispose of the whole or a large part of the Company's assets (whether by one transaction or a series of transactions);
   14. acquire the whole or part of any other company or business;
   15. buy, sell, lease or let a property or interest in a property;
   16. buy any capital item or connected items exceeding £ ;
   17. pay or declare any dividend other than as set out in this Agreement;
   18. enter into any contract of an unusual or long-term nature or with a value exceeding £ ;
   19. engage any person as an employee, consultant or agent with a yearly salary or pay of more than £  or increase (or agree to increase) the yearly salary or pay of a director, employee, consultant or agent by more than £ ;
   20. start any legal proceedings (other than debt recovery in the ordinary course of business);
   21. grant any options over any of its share capital;
   22. alter, reorganise or grant any rights relating to its share capital; or
   23. have an accounting period of anything other than 12 months.

SHAREHOLDER OBLIGATIONS AND ENTITLEMENTS

Duties

1. Each Shareholder must act in good faith towards the others in promoting the Business and carrying out this Agreement.
2. Each Shareholder will use reasonable efforts to promote and develop the Business to the Company's best commercial advantage.
3. Each Shareholder must comply with all applicable laws, statutes, regulations and codes relating to anti-bribery and anti-corruption, including the Bribery Act 2010.

Confidentiality

1. Except as set out below in this section, the Shareholders must not at any time disclose any Confidential Information to any other person or use it for any purpose other than in the performance of their obligations as Shareholders. This obligation of confidentiality will continue to bind a Shareholder after they cease to be a Shareholder.
2. The obligation of confidentiality in the previous paragraph will not apply to information that is or becomes generally available to the public (other than as a result of its disclosure by a Shareholder in breach of this Agreement).
3. A Shareholder can disclose Confidential Information to:
   1. a governmental, regulatory or other authority if disclosure is required by law, court order or a duty imposed by a regulatory authority;
   2. his professional advisors; or
   3. the professional advisers of the Company.

Obligations on Leaving

1. Each Leaving Shareholder must pay into the Company's bank account immediately all sums due from them to the Company.
2. Each Leaving Shareholder must return to the Company all accounting records, letters and other documents in their possession relating to the Company which are needed for the continuing conduct of the Business.
3. Each Leaving Shareholder must promptly do everything and sign all documents reasonably requested by the Company (and at the Company's sole expense) to transfer to it any property or assets owned by the Leaving Shareholder as nominee for or in trust for the Company.

Intellectual Property

1. The Company owns absolutely any Intellectual Property created or discovered by a Shareholder which relates to the Business or can be used in the Business (other than Intellectual Property which the Shareholders, acting reasonably and in good faith, agree was not connected with and did not in any way affect or relate to the Business as at the date of its creation or discovery and was not intended to be connected with or otherwise so affect or relate to the Business).
2. Shareholders must promptly notify the Company of all Intellectual Property they have created (or partly created) and which relates to the Business or can be used in the Business. All this Intellectual Property will vest in the Company automatically on creation (and if it does not, the relevant Shareholder(s) will hold it on trust for the Company). Shareholders must, at the Company's sole expense, promptly do everything and sign all documents necessary to transfer ownership of this Intellectual Property to the Company and enable the Company to enforce its Intellectual Property.

GENERAL

Status of This Agreement

1. This Agreement will prevail if any of its provisions conflict with anything in the Articles. Any Shareholder can require that the Shareholders amend the Articles to bring them in line with this Agreement.
2. Each Shareholder will exercise their voting rights and other powers of control relating to the Company to ensure this Agreement is observed in line with its spirit and the parties' intentions.

Assignment

1. Shareholders cannot assign, sub-contract or in any other way transfer to any third party the benefit and/or burden of this Agreement without the prior written agreement of all the other Shareholders (who cannot withhold consent unreasonably).

Notices

1. Any notice (other than in legal proceedings) to be given under this Agreement must be in writing and delivered by handing it personally, in the case of a Shareholder, to the Shareholder in question, or by posting pre-paid first class post to or by leaving it by hand delivery at the registered address of the Company or, in the case of a Shareholder, at the last known address of such Shareholder or by sending it by email to the business email address of the chief executive or equivalent in the case of the Company and in the case of a Shareholder, that Shareholder's email address as notified by the Shareholder in question as being an address at which such Shareholder is prepared to accept service of notices.
2. Notices which are:
   1. sent by post will be deemed to have been received, where posted from and to addresses in the United Kingdom, on the second Business Day after the date of posting, and where posted from or to addresses outside the United Kingdom, on the tenth Business Day after the date of posting;
   2. delivered by hand will be deemed to have been received at the time the notice is left at the proper address; and
   3. sent by email will be deemed to have been received on the next Business Day after sending.

Company Communications

1. The Shareholders agree to the use by the Company of electronic communications when communicating with the Shareholders at the Company's discretion.

Entire Agreement

1. This Agreement contains the whole agreement between the parties relating to its subject matter and supersedes all prior discussions, arrangements or agreements that might have taken place concerning the Agreement. Nothing in this paragraph limits or excludes any liability for fraud or fraudulent misrepresentation.

Variation

1. No variation to this Agreement will be valid or binding unless it is recorded in writing and signed by or on behalf of the parties.

No Partnership or Agency

1. This Agreement does not create a partnership between any of the Shareholders.
2. Nothing in this Agreement makes any Shareholder an agent of any other Shareholder.

Miscellaneous

1. The Contracts (Rights of Third Parties) Act 1999 will not apply to this Agreement and no third party will have any right to enforce or rely on any provision of this Agreement.
2. No delay, act or omission by a party in exercising any right or remedy will be deemed a waiver of that, or any other, right or remedy.
3. Provisions which, by their intent or terms, are meant to survive the termination of this Agreement will do so.
4. If any court or competent authority finds that any provision of this Agreement (or part of any provision) is invalid, illegal or unenforceable, that provision or part-provision will, to the extent required, be deemed to be deleted, and the validity and enforceability of the other provisions of this Agreement will not be affected.

Further Assurance

1. Each party will do everything and sign all documents reasonably necessary to give effect to this Agreement.

Governing Law and Jurisdiction

1. This Agreement shall be governed by and interpreted according to the law of England and Wales and all disputes arising under the Agreement (including non-contractual disputes or claims) shall be subject to the exclusive jurisdiction of the English and Welsh courts.

This Agreement has been executed as a deed on the day and year first before written.