Shareholder agreements can be a waste of time, energy and money

whipit.co.nz

In my last few years practising law I reviewed, drafted and negotiated literally hundreds of shareholder agreements.  But I have recently come to the conclusion that, for the most part, shareholder agreements are an unnecessary distraction for the shareholders and do nothing to advance the interests of the company to which they relate.  Too often shareholders have fought over utterly useless but irritating clauses with the only winner being the lawyers who usually charge on a 6-minute basis while they engage in point-scoring at the expense of their respective clients.

My view was (and still is) that all of the important provisions should be incorporated into the company’s constitution.  After all, constitutions are well tried and tested, having been around for over 100 years (assuming the starting point for NZ was the 1908 Companies Act).  Constitutions are neutral, they do not take sides and the standard provisions apply to all the shareholders, regardless of who they are or how they became stakeholders in the first place.

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