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Shareholders' Agreement


The Shareholders' Agreement is intended to govern the relationship between a number of shareholders in a company. Although the Articles of Association provides some protection for minority shareholders, it is always possible to change the Articles of Association with a 75 per cent majority. The Shareholders' Agreement works as a second layer of protection, preventing the company from being run in a manner other than has been agreed.

Here are two clauses from a Shareholders' Agreement, setting out the general duties on the shareholders. Complete the texts using the words in the box.

binding breach conduct consent default devote efficient obligations perform promote provisions represents resources undertake validly


Each of the Shareholders represents to the other that it has taken all necessary other actions to enable him . to accept and .. the . required under the terms of this Agreement and that performance of the .. of this Agreement will not result in a . of or constitute a . under any agreement or other contractual restriction upon him.

The Shareholders . with each other that they shall not without the prior written .. of the other parties while a shareholder in the Company become involved in any business other than that of the Company and that they shall during such period use all reasonable endeavours to . the interests of the Company and . to its business such of their respective time and attention and . as are reasonably required for the and profitable ..of the business of the Company.


Share capital

Link the phrase on the left to its definition on the right.

Phrases Definitions
share capital a If authorized by its articles, a company may transfer profits to a fund called its 'capital redemption reserve' and use it to issue these shares to the members in proportion to their existing holdings.
authorized capital b That part of the share capital that the company has decided will only be called up if the company is being wound up and for the purposes of it being wound up.
issued capital c The amount of share capital stated in the articles of association.
allotment of shares d That part of the issued capital on which the company has not requested payment.
nominal value e The process by which people become members of a company.
bonus shares f The amount of share capital the company will have.
paid-up capital g The issued capital which has been fully or partly paid- up by the shareholders.
uncalled capital h The excess paid above a share's nominal value.
reserve capital i A company's authorized share capital is divided into shares of a symbolic value. The real value of the shares may change over time, reflecting what the company is worth, but their symbolic value remains the same.
share premium j The value of the shares issued to shareholders, i.e. the nominal value of the shares rather than their actual worth.

When a company is formed, the person or people forming it decide whether its members' liability will be limited by shares. The members must agree to take some, or all, of the shares when the company is registered. The articles of association must show the names of the people who have agreed to own shares and the number of shares each will own. These people are called the subscribers.


The Annual General Meeting (AGM)

Here is a sample form of the notice of invitation to an AGM. Complete the missing information using the words/phrases in the box.

accounts auditors Board dividend held hereby member poll proxy purpose reappoint registered report vote



NOTICE IS HEREBY GIVEN that the fifth Annual General Meeting of the Company will be .. at BACO House on 15th January 2001 at 2.00 pm for the . of carrying on the business as is stated below:

  1. To receive the . of the Company and the Directors' .. for the year ended 30th September 2000.
  2. To approve the declaration of a final .. of £87.32.
  3. To reappoint Grabbit and Wrun as of the Company.
  4. To John Bailey and Leslie Cohen as Directors of the Company.

Dated 19th October 2000 By Order of the .

Jeremy Sunders


. Office:

BACO House

Tewkesbury Road



Note: A member who is entitled to attend and . at this meeting is entitled to appoint a to attend and, on a .., vote instead of him. A proxy need not also be a . of the Company.

The Annual General Meeting is held once a year and all shareholders are invited to attend. In advance of the meeting, an invitation must be sent out.


Below are some key terms from the area of bankruptcy and insolvency. Match each word to its definition.


administration order j
compulsory liquidation  
disqualification of directors  
fraudulent trading  
going concern  
official receiver (OR)  
secured creditor  
undischarged bankrupt  


a A director found to have conducted the affairs of an insolvent company in an 'unfit' manner may be disqualified from holding any management position in a company for between 2 and 15 years.
b A written application to the court for relief or remedy.
c Someone against whom a bankruptcy order has been made.
d The procedure whereby the assets of a company (or partnership) are gathered in and realized, the liabilities met and the surplus, if any, distributed to members.
e The basis on which insolvency practitioners prefer to sell a business. Effectively it means the business continues, jobs are saved, and a higher price is obtained.
f An agreement between a debtor and his creditors whereby the creditors agree with the debtor between themselves to accept from the debtor payment of less than the amounts due to them in full satisfaction of their claim.
g The person appointed to deal with the assets and liabilities of the company or partnership once the resolution to wind up has been passed or a compulsory winding-up order has been made.
h Someone against whom a bankruptcy order has been made and who has not been discharged from bankruptcy.
i The placing of a company into liquidation as a result of an application to the court, usually by a creditor.
j A court order placing a company that is, or is likely to become, insolvent under the control of an administrator.
k Where a company has carried on business with intent to defraud creditors, or for any fraudulent purpose.
l The state of not being able to pay one's debts as they fall due or having an excess of liabilities over assets.
m The civil servant employed to head the regional offices whose responsibilities cover bankruptcies and compulsory liquidations.
n The first to be paid from the secured assets.


Bankruptcy law provides for the development of a supervised plan that allows a debtor, who is unable to pay his creditors, to resolve his debts through the division of his assets among his creditors. This allows the interests of all creditors to be treated with some measure of equality. Certain bankruptcy proceedings allow a debtor to stay in business and help him pay his debts. An additional purpose of bankruptcy law is to allow certain debtors to be released from their financial obligations after their assets are distributed, even if their debts have not been paid in full.


Date: 2015-01-12; view: 2707

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