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Shareholders Agreement

Updated: Mar 7



Shareholders Agreement


A shareholders' agreement (SHA) is a legally binding contract between the shareholders of a company that establishes the rights, responsibilities, and procedures for managing the company and for the resolution of disputes.


In Hong Kong, a SHA is not a mandatory document, but it is highly recommended for all companies, regardless of size or structure. This is because an SHA can help to:


  • Protect the interests of all shareholders

  • Prevent disputes between shareholders

  • Provide clarity on the company's governance structure

  • Facilitate the smooth running of the company

The specific provisions of a SHA will vary depending on the specific circumstances of the

company, but some common clauses that may be included in a Hong Kong SHA include:


  • Shareholder rights and responsibilities

  • Board composition and voting rights

  • Dividend policy

  • Transfer of shares

  • Dispute resolution

  • Buy-sell agreements

  • Drag-along and tag-along rights


It is important to note that a SHA is a complex document and should be drafted by a professional who is familiar with Hong Kong law.


Here are some of the key issues that should be addressed in a shareholders' agreement in Hong Kong:


  • Shareholder rights and responsibilities: This section should set out the rights and responsibilities of each shareholder, such as the right to vote, the right to dividends, and the right to participate in management.

  • Board composition and voting rights: This section should set out how the board of directors will be composed and how voting rights will be allocated.

  • Dividend policy: This section should set out the company's dividend policy, such as how often dividends will be paid and how much each shareholder will receive.

  • Transfer of shares: This section should set out the restrictions on the transfer of shares, such as whether the company has a right of first refusal or whether shareholders need to obtain the consent of other shareholders before transferring their shares.

  • Dispute resolution: This section should set out how disputes between shareholders will be resolved, such as through arbitration or mediation.

  • Buy-sell agreements: This section should set out the terms under which a shareholder can sell their shares to the company or to other shareholders.

  • Drag-along and tag-along rights: These rights allow a majority shareholder to force minority shareholders to sell their shares if the majority shareholder is selling their shares to a third party.


It is important to tailor the specific provisions of a shareholders' agreement to the specific circumstances of the company.


Why Adopt It


There are many reasons why a shareholders' agreement (SHA) is important for companies in Hong Kong. Here are some of the key reasons:


  • To protect the interests of all shareholders: An SHA can help to protect the interests of all shareholders by setting out their rights and responsibilities, and by providing a framework for resolving disputes. This can be especially important in the event of a disagreement between shareholders, or if one shareholder wants to sell their shares to a third party.

  • To prevent disputes between shareholders: An SHA can help to prevent disputes between shareholders by setting out clear rules and procedures for managing the company. This can help to avoid disagreements about issues such as board composition, voting rights, and dividend policy.

  • To provide clarity on the company's governance structure: An SHA can provide clarity on the company's governance structure by setting out the roles and responsibilities of the board of directors, the shareholders, and the management team. This can help to avoid confusion and conflict about who is responsible for making decisions about the company.

  • To facilitate the smooth running of the company: An SHA can help to facilitate the smooth running of the company by providing a framework for resolving disputes and by clarifying the roles and responsibilities of the different stakeholders. This can help to avoid delays and disruptions to the company's operations.


In addition to these key reasons, an SHA can also be used to:


  • Provide for the exit of a shareholder

  • Set out the terms of a merger or acquisition

  • Protect the company's intellectual property

  • Deal with other important issues that may arise in the course of the company's operations.


Overall, an SHA is a valuable tool that can help to protect the interests of all shareholders, prevent disputes, and facilitate the smooth running of a company. If you are considering starting a company in Hong Kong, or if you are already a shareholder in a company, it is important to consider having an SHA drafted by a professional who is familiar with Hong Kong law.


Here are some additional benefits of having a shareholders' agreement in Hong Kong:


  • It can help to attract investors and partners.

  • It can make it easier to raise capital.

  • It can help to reduce the risk of legal disputes.

  • It can provide a framework for resolving disputes that may arise in the future.


If you are thinking of starting a business in Hong Kong, or if you are already a shareholder in a company, it is important to consider having a shareholders' agreement drafted by a professional who is familiar with Hong Kong law. An SHA can help to protect your interests and ensure the smooth running of your business.


Some of the Most Common Issues of a Shareholders’ Agreement


Here are some of the most common issues of a shareholders' agreement in Hong Kong:

  • Shareholder rights and responsibilities: This section should set out the rights and responsibilities of each shareholder, such as the right to vote, the right to dividends, and the right to participate in management.

  • Board composition and voting rights: This section should set out how the board of directors will be composed and how voting rights will be allocated.

  • Dividend policy: This section should set out the company's dividend policy, such as how often dividends will be paid and how much each shareholder will receive.

  • Transfer of shares: This section should set out the restrictions on the transfer of shares, such as whether the company has a right of first refusal or whether shareholders need to obtain the consent of other shareholders before transferring their shares.

  • Dispute resolution: This section should set out how disputes between shareholders will be resolved, such as through arbitration or mediation.

  • Buy-sell agreements: This section should set out the terms under which a shareholder can sell their shares to the company or to other shareholders.

  • Drag-along and tag-along rights: These rights allow a majority shareholder to force minority shareholders to sell their shares if the majority shareholder is selling their shares to a third party.

  • Non-compete and confidentiality clauses: These clauses can be used to protect the company's confidential information and to prevent shareholders from competing with the company after they leave.

  • Amendment and termination provisions: This section should set out how the shareholders' agreement can be amended and how it can be terminated.


It is important to note that these are just some of the most common issues that may be addressed in a shareholders' agreement. The specific provisions of an SHA will vary depending on the specific circumstances of the company. It is important to consult with a professional who is familiar with Hong Kong law to draft a shareholders' agreement that meets your needs.

Here are some additional issues that may be considered in a shareholders' agreement in Hong Kong:

  • Voting thresholds: This section should set out the voting thresholds required for certain decisions, such as amendments to the shareholders' agreement or the sale of the company.

  • Preemption rights: This section should set out the rights of shareholders to purchase shares that are being sold by other shareholders.

  • Liquidation preferences: This section should set out the order in which shareholders will be paid in the event of a liquidation of the company.

  • Change of control provisions: This section should set out the events that would trigger a change of control of the company, and the rights of shareholders in the event of a change of control.


These are just some of the many issues that may be considered in a shareholders' agreement. It is important to consult with a professional who is familiar with Hong Kong law to draft a shareholders' agreement that meets your needs.


How Bestar can Help


Bestar is a accounting firm in Hong Kong that also offers corporate secretarial services. They can help you with the following aspects of a shareholders' agreement:


  • Drafting: We can help you draft a shareholders' agreement that is tailored to your specific needs and circumstances. We will take into account the size and structure of your company, the number of shareholders involved, and the specific issues that you want to address.

  • Reviewing: If you already have a shareholders' agreement, Bestar can review it to make sure that it is up-to-date and compliant with Hong Kong law. We can also help you to identify any potential problems with the agreement and suggest ways to improve it.

  • Administering: Once the shareholders' agreement is in place, Bestar can help you to administer it. This includes keeping track of the terms of the agreement, resolving any disputes that may arise, and making sure that the agreement is updated as needed.


Here are some of the benefits of using Bestar to help you with your shareholders' agreement:


  • We have a team of experienced accountants and corporate secretaries who are familiar with Hong Kong law.

  • We can draft a shareholders' agreement that is tailored to your specific needs and circumstances.

  • We can review your existing shareholders' agreement and make sure that it is up-to-date and compliant with Hong Kong law.

  • We can administer your shareholders' agreement and help you to resolve any disputes that may arise.

  • We are committed to providing our clients with high-quality accounting and corporate secretarial services.


If you are considering drafting a shareholders' agreement for your company in Hong Kong, contact Bestar to discuss your needs.



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