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Shareholder Agreement Vs Articles of Association – mOVE 360

Shareholder Agreement Vs Articles of Association

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As a business owner, it is important to understand the legal agreement that governs your company`s operations. Two of the most important legal documents that every business owner must be familiar with are the shareholder agreement and the articles of association.

In this article, we will explore the differences between these two legal agreements and their individual roles in the governance of a company.

Shareholder Agreement

A shareholder agreement is a legal document that outlines the rights and obligations of the shareholders of a company. This agreement is made between shareholders to govern a company`s operations. It is not a public document and does not need to be filed with any government agency. Instead, it is a private agreement between the shareholders of a company.

The shareholder agreement typically contains clauses that address the following issues:

– The rights and obligations of each shareholder

– The process of buying and selling shares

– The process of appointing and removing directors

– The distribution of profits and losses

– The decision-making process for major business decisions

It is important to note that the shareholder agreement is binding only on the parties that are involved in the agreement, and not on the company itself.

Articles of Association

The articles of association, on the other hand, are a public document that outlines the internal rules and regulations of a company. This document is filed with the government agency responsible for registering companies in the jurisdiction where the company is incorporated.

The articles of association typically contain clauses that address the following issues:

– The rights and obligations of shareholders

– The process for appointing and removing directors

– The roles and responsibilities of directors

– The process for calling and holding meetings

– The process for voting and decision-making

– The distribution of profits and losses

The articles of association are binding on the company, its shareholders, and its directors. They provide a framework for the governance of the company and outline the procedures and rules that must be followed.

Differences between Shareholder Agreement and Articles of Association

The main difference between a shareholder agreement and the articles of association is that the shareholder agreement is a private agreement between the shareholders, while the articles of association is a public document that outlines the internal rules and regulations of the company.

Another difference is that the shareholder agreement typically covers issues that are specific to the shareholders, while the articles of association cover issues that relate to the governance of the company as a whole.

Which is More Important?

Both the shareholder agreement and articles of association are important legal documents that are necessary for the governance of a company. The shareholder agreement is essential for protecting the interests of the shareholders, while the articles of association provide a framework for the governance of the company.

In conclusion, it is essential for every business owner to be familiar with both the shareholder agreement and the articles of association. These documents provide a legal framework for the governance of the company and ensure that the interests of all stakeholders are protected.

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