Each company is different. It has a different business, a different model as regards its intended objective, which could (but not always) include maximising sales, how it will be funded, who will benefit and what geographical areas or specific sectors it will target.
Fulfilling those objectives is not always the most important consideration at the outset but, as the business grows, the interests of shareholders in the growth of the company changes. This may include what reasonable expectations each shareholder had of their involvement in the company’s business and what they intended to gain from it.
As these issues crop up decisions will have to be made and, in the absence of any other document, shareholders and directors can only look to the Articles to define how they should act in a given circumstance. However the Articles only provide a very strict formula for running the company. They are not intended to be subjective and are not flexible enough to cater to the original intentions of the shareholders who own it.
Accordingly, it is always recommended that shareholders sign off an agreement as to their various rights, obligations and rules which will dictate what happens in the event of any future problems arising or any dispute between shareholders or between shareholders and the directors.
A Shareholders Agreement will always prevail over any conflict with the Articles and can provide a great source of comfort for minority shareholders, whose interests would otherwise be solely subject to the goodwill of majority shareholders, and will provide a more relevant set of rules as to what will happen in any given circumstance.
