What does the Shareholders’ Agreement mean?

What is a shareholders agreement in a Singapore Company? What purpose it serves?

A Shareholders’ Agreement is a legal agreement that supplements the constitution of a private limited company. It is a formal agreement between the shareholders. It sets out rules to govern the relationship between different shareholders and agreements they may have.

A shareholders agreement is an external document to the company. It is governed by the contract law and not companies act.

Three types of shareholders’ agreements are :

• Agreement between all the shareholders of a company
• Agreement between a group of shareholders of a company
• Agreement between shareholders and company

A shareholders’ agreement saves both time and cost during a dispute between shareholders.

As an example, let's say, you incorporated a company, and then decide to get one more shareholder with some specific duties that he is expected to complete. In that case, you can formalise this agreement in the form of a shareholders agreement.