Companies which opt to run along the same lines as a partnership often use shareholder agreements. So do corporate partners in joint business ventures.

The Articles of Association regulate the majority of a limited company's management and internal affairs. However, shareholders can still enter into separate contractual agreements with each other. These agreements can contain provisions that might otherwise normally be found in a partnership agreement.

They can establish policies, regulate practices and set out obligations not covered by the Articles. They can cover such things as diverse as dividend policies and management participation.

They can provide for what will happen to a given individual's shareholding if they die, go bankrupt or want to sell up. They also typically contain mechanisms to avoid deadlocks and resolve disputes between individual shareholders.

Minority shareholders can protect themselves against majority rule. They can also prevent the arrangement agreed when the business was first established from being changed. Shareholder agreements allow them to veto actions which they might otherwise have been powerless to stop.

Corporate joint venture partners can similarly record their performance expectations, regulate the activities of the joint venture and set decision-making guidelines. If drawn properly, such agreements are not open to public inspection, nor need they be registered at Companies House.

These benefits alone demonstrate the usefulness of shareholder agreements. A number of hurdles must first be overcome to enable them to be set up successfully - however, used imaginatively they can provide both peace of mind and a level of protection that few minority shareholders can afford to be without!

To find out more about shareholder agreements, please contact Gareth Thompson - call 01562 66000 or email gbt@dwt.co.uk.