Shareholder Agreement Kenya

A shareholders` agreement must set the maximum number of directors and the percentage of shares necessary for the appointment of a director. It should also include provisions on when and how a director may be removed, his or her duties, how meetings will be called and how he or she will vote (i.e. each director will have or will have as many votes as the shareholder who appointed him?). One of the main purposes of a shareholders` agreement is to determine what can lead to termination and what the consequences are if the parties follow separate paths. You need to understand in advance what your client wants to get out of the business, as this influences other choices such as ownership structure, decision making, and exit strategy. It`s important to understand how the new business fits into your client`s overall strategy. Shareholder agreements often have limits for shareholders participating in competing companies. Your client could seek benefits from participating in the joint venture, apart from a direct financial return. These other benefits could include access to a share of the company`s output, the ability to provide goods or services to the business, geographic area or nature of the business, if the shareholder holds an option to act alone in the future.

The agreement should clearly define the shareholders` participation, the different classes of shares allowed (if the company has shares other than ordinary shares), the rights attached to each class of shares, the voting rights of the shareholders and any rights or restrictions granted imposed and related to certain shareholders (e.g. B call options / share exercise / trading restrictions, etc.). In general, the agreement provides that any issue of new shares will first be offered in proportion to the existing shareholders. This is called the “right of pre-emption” of shareholders and entrepreneurs who should be aware of this right. If there are more than two shareholders, depending on the distribution of decisions between the board of directors and the shareholders and the number of directors or shareholders, it may nevertheless be worth thinking about the impasse and how to resolve it. The simplest approach is to leave the decision to the board of directors. Serious blockages could also be the cause of the termination of the joint venture. Think about the issues that are so fundamental to the business and why your customer is in the company, that they want to be able to walk away from the company if no agreement has been reached on the problem. . .

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