Private companies can generally undertake any commercial business that the directors believe is in the best interest of the company. The shareholders’ agreement may therefore set out the nature and extent of the company’s business proposition so that it is limited to the area the shareholders originally contemplated.

Under company law, day to day business decisions are generally made by the directors and the shareholders are not involved. The shareholders’ agreement can set out key areas which the shareholders’ wish to have control over and possibly veto rights and/or weighted voting provisions.

The shareholders’ agreement will often also set out rights to appoint directors; if shareholders wish to have representation at board level.

It is not uncommon for a shareholder (or a related party to a shareholder) to be a director. This puts them potentially in a very strong position to decide their own salary. This will potentially be to the detriment of the other shareholders as the salary will reduce the amount available for dividends.

The shareholders’ agreement can set out the director’s initial salary and a mechanism for review of the salary.

Shareholders in private companies are likely to know the business and customers of the company. The shareholders’ agreement can include provisions restricting the shareholders from competing with the company during their time as shareholders and for a reasonable period afterwards.

The restriction should be limited in geography and in the scope of the non-compete.

For many companies, their staff really are their most valuable asset. The shareholders’ agreement can therefore include provisions to restrict a shareholders ability to poach key staff from the company. This can apply for the duration of their time as a shareholder and for a reasonable period after.