Shareholders Agreement - Template, Sample Form Pro · NG-law

SHAREHOLDERS' AGREEMENT

THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made this ________ (the "Effective Date").

BETWEEN

________, a private company limited by shares duly incorporated under the Companies and Allied Matters Act 2020 with Registration Number (RC) ________, having its registered office at:

________

(hereinafter referred to as the "Company", which expression shall, where the context so admits, include its successors-in-title and assigns) of the first part;

AND

________, an individual holding means of identification number ________, of the following address:

________

(hereinafter referred to as "Shareholder 1", which expression shall, where the context so admits, include their personal representatives, successors-in-title and assigns) of the second part;

AND

________, an individual holding means of identification number ________, of the following address:

________

(hereinafter referred to as "Shareholder 2", which expression shall, where the context so admits, include their personal representatives, successors-in-title and assigns) of the third part.

(The Company and the Shareholders are hereinafter collectively referred to as the "Parties" and individually as a "Party".)

RECITALS

(A) The Company is a private company limited by shares incorporated under the laws of the Federal Republic of Nigeria.

(B) The Shareholders are the registered holders of the issued shares of the Company in the proportions set out in this Agreement.

(C) The Parties have agreed to regulate their relationship as shareholders of the Company and the conduct of the affairs of the Company upon the terms and conditions set out in this Agreement, which shall be read together with the Memorandum and Articles of Association of the Company.

NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

§ 1. DEFINITIONS AND INTERPRETATION

1.1 In this Agreement, unless the context otherwise requires:

"Act" means the Companies and Allied Matters Act 2020 and any amendment, re-enactment or replacement thereof.

"Articles" means the Articles of Association of the Company.

"Board" or "Board of Directors" means the directors of the Company for the time being.

"Business" means the objects and purpose of the Company as described in § 2 of this Agreement.

"Business Days" means any day other than a Saturday, Sunday or any public holiday declared by the Federal Government of Nigeria.

"CAC" means the Corporate Affairs Commission.

"Chairman" means the person who presides over the general meetings and the meetings of the Board of Directors of the Company.

"Confidential Information" has the meaning given to it in § 22.

"Disclosing Party" means the Party who shares Confidential Information or Trade Secret Information with the Receiving Party under this Agreement.

"Director" or "Directors" means a member or members of the Board of Directors.

"Drag Along Shares" means the shares which the Shareholders are required to transfer to the Offeror under § 8.

"Encumbrance" means any mortgage, charge, pledge, lien, security interest or other third party right or interest in respect of any asset or security.

"Majority Shareholder" means the Shareholder holding the highest percentage of the issued shares of the Company.

"Memorandum" means the Memorandum of Association of the Company.

"NDPA" means the Nigeria Data Protection Act 2023.

"Net Profit/Income" means the total profit or income of the Company less all debts, costs, expenses, taxes and other liabilities incurred by the Company.

"Offeror" means the party or parties offering to purchase the Drag Along Shares.

"Receiving Party" means the Party that receives Confidential Information or Trade Secret Information from the Disclosing Party.

"Retiring Director" means a director subject to retirement and rotation.

"Transferee" means any third party willing to purchase the shares of the Transferor.

"Transferor" means any Shareholder intending to transfer their shares by way of sale.

"Transfer Shares" means the shares which the Transferor proposes to sell.

"Transfer Notice" means the notice by which the Transferor offers its Transfer Shares to the other Shareholders.

1.2 In this Agreement, references to the singular include the plural and vice versa; references to statutes include any modification or re-enactment thereof; and the headings are for convenience only and shall not affect interpretation.

1.3 In the event of any conflict between this Agreement and the Articles, this Agreement shall prevail as between the Shareholders, and the Shareholders shall procure that the Articles are amended to give effect to the provisions of this Agreement to the extent permitted by the Act.

§ 2. SCOPE AND OBJECTS OF THE COMPANY

2.1 The objects of the Company are as follows:

________

2.2 Each Shareholder undertakes to be bound by the provisions of this Agreement and to co-operate with the Company and the other Shareholders to ensure that the Company attains its objects in accordance with the Act.

§ 3. SHARE CAPITAL AND STRUCTURE

3.1 The Company has an issued share capital of ₦________, divided into ________ ordinary shares of ₦________ each, of which ________ shares have been issued and fully paid up.

3.2 The shareholding of the Shareholders is as follows:

(I) ________: ________ shares, representing ________% of the issued share capital.

(II) ________: ________ shares, representing ________% of the issued share capital.

3.3 The Company acknowledges that the shares allotted to the Shareholders have been fully paid up.

§ 4. TRANSFER OF SHARES

4.1 A Shareholder may transfer all or part of their shares to a personal representative, a wholly-owned subsidiary or any other party, provided that the transfer is effected in accordance with the Articles, the Act and this Agreement, by a duly executed instrument of transfer and, in the case of a sale, at fair market value.

4.2 The Shareholders agree not to sell or transfer any Transfer Shares to any third party who is not a member of the Company without first offering the Transfer Shares to the existing Shareholders in accordance with this § 4 (the "pre-emption right").

4.3 A Transferor wishing to sell, transfer or otherwise dispose of all or part of their shares shall serve a Transfer Notice on the other Shareholder(s) specifying the number of Transfer Shares and the proposed price.

4.4 The other Shareholder(s) shall have a maximum of ________ Business Days from the date of the Transfer Notice within which to accept or reject the offer. Where no response is received within that period, or the offer is declined, the Shareholder(s) shall be deemed to have no interest in the Transfer Shares, and the Transferor may sell the unsold Transfer Shares to any third party at a price not lower than that stated in the Transfer Notice.

4.5 Where the Shareholders decline to purchase all the Transfer Shares, the Transferor may sell the unsold Transfer Shares to any third party in accordance with § 4.4.

4.6 The Company shall, subject to the Act, have the right to purchase the shares of a Shareholder where any of the following occurs:

(I) where the Shareholder, being an employee of the Company, ceases to be an employee;

(II) where the Shareholder is adjudged bankrupt by a court of competent jurisdiction;

(III) where the Shareholder becomes a person of unsound mind.

§ 5. VALUATION OF SHARES

5.1 Where a Shareholder or the Company exercises a right to purchase Transfer Shares under this Agreement, the Transfer Shares shall be valued at fair market value as determined by the auditors of the Company or by an independent valuer jointly appointed by the Parties, whose determination shall be final and binding save in the case of manifest error.

§ 6. PRE-EMPTION RIGHTS ON ALLOTMENT

6.1 In accordance with Section 142 of the Act, the Company shall not allot any new or unissued shares unless such shares are first offered to all the existing Shareholders in proportion, as nearly as may be, to their existing holdings, by a written notice from the Company specifying the price per share and the period within which the offer must be accepted.

6.2 New shares may be offered for subscription in cash or for consideration other than cash.

6.3 The subscription price shall be determined by the Board or, failing agreement, by the auditors of the Company.

6.4 Where a Shareholder declines the offer, the Board may, subject to any resolution of the Company, dispose of the unsubscribed shares at a price not less than that specified in the offer and on such terms as the Board considers most beneficial to the Company.

§ 7. ACQUISITION OF SHARES BY THE COMPANY

7.1 The Shareholders acknowledge that the Company may, subject to Sections 184 to 190 of the Act, acquire its own shares from:

(I) existing Shareholders or security holders on a proportionate basis;

(II) existing Shareholders pursuant to a scheme of arrangement sanctioned by the court;

(III) the open market; and

(IV) employees holding shares pursuant to a stock option or similar scheme.

§ 8. DRAG ALONG RIGHTS

8.1 Where the Majority Shareholder wishes to transfer its shares to an independent third party in a merger, acquisition or sale transaction, the Majority Shareholder may require the other Shareholders to transfer their shares to the Offeror on the same price, terms and conditions.

8.2 This right shall be exercisable upon the Majority Shareholder serving prior written notice of ________ on all the Shareholders, stating the number of Drag Along Shares, the price and the terms and conditions of the sale.

8.3 Upon expiry of the notice, the Shareholders shall be bound to accept the Offeror's offer, transfer their shares free from all Encumbrances, and execute all documents and do all things necessary to give effect to the transfer.

§ 9. TAG-ALONG RIGHTS

9.1 Where the Majority Shareholder wishes to sell its shares to a third party, the other Shareholders shall have the right to require the third party to purchase their shares on the same terms and conditions agreed with the Majority Shareholder, and the Company and the Majority Shareholder shall take all reasonable steps to give effect to such sale.

9.2 Each Shareholder may elect either to exercise the tag-along right on the said terms or to negotiate fresh terms with the third party.

§ 10. MANAGEMENT AND CONTROL

10.1 Composition of the Board: Subject to this Agreement and the Act, each Shareholder shall be entitled to be a Director of the Company and the Shareholders shall together constitute the Board.

10.2 The Directors shall be responsible for the management of the Company and the maintenance of its books and accounting records, and shall hold meetings at such intervals as are expedient for the efficient management of the Company.

10.3 Chairman: The Chairman of the Board shall be nominated by the Board and shall preside over all Board meetings. Where the Chairman is absent, the Directors present may elect any Director to preside. In the event of an equality of votes, the Chairman shall have a casting vote.

10.4 Managing Director/Chief Executive Officer: The Managing Director shall be appointed by the Board from among the Directors, for a term of ________.

10.5 The Company shall pay the Directors such sitting fees and Directors' fees, and reimburse such reasonable expenses, as may be approved by the Shareholders in general meeting.

10.6 Company Secretary: In accordance with the Act, the Company Secretary shall be appointed by the Directors on such terms and remuneration as they think fit, and shall:

(I) assist the Chairman and the Managing Director in determining the annual Board plan and in the administration of strategic matters at Board level;

(II) provide the Board and individual Directors with guidance on the discharge of their responsibilities in the best interest of the Company;

(III) circulate notices of Board and general meetings to those entitled to attend;

(IV) compile Board papers and ensure that the Board's deliberations and decisions are properly recorded and communicated; and

(V) provide guidance to the Board on ethics, conflicts of interest and good corporate governance.

10.7 Retirement and Rotation: All Directors shall retire at every annual general meeting and shall be eligible for re-election by the Shareholders.

§ 11. POWERS AND DUTIES OF DIRECTORS

11.1 The business of the Company shall be managed by the Directors, who may exercise the powers of the Company in accordance with the Act, the Memorandum and the Articles, and who shall at all times act in good faith and in the best interest of the Company in accordance with Sections 305 to 309 of the Act.

11.2 Every Director shall hold at least ________ shares in the Company.

11.3 A Director may hold any other office of profit under the Company (other than that of auditor) in conjunction with the office of Director, on such terms as the other Directors may determine, subject to disclosure of any conflict of interest under Section 303 of the Act.

11.4 All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments shall be executed in such manner as the Directors may from time to time determine.

11.5 The Directors shall cause proper books of account to be kept recording:

(I) all sums of money received and expended by the Company;

(II) all sales and purchases of the Company; and

(III) the assets and liabilities of the Company.

11.6 The books of account shall be kept at the registered office or such other place as the Directors think fit and shall be open to inspection in accordance with the Act.

11.7 The Directors shall cause financial statements, including profit and loss accounts, balance sheets, group accounts (if any) and reports, to be prepared and laid before the Company in general meeting in accordance with the Act.

§ 12. RESERVED MATTERS / CORPORATE LIMITS

12.1 The Company shall not undertake the following actions without the prior approval of the Shareholders:

(I) Sale or Disposal of Assets: the sale or disposal of any asset exceeding 50% of the Company's total assets, without the approval of all the Shareholders;

(II) Acquisition of Assets: the acquisition of any new asset, without the approval of a majority of the Shareholders;

(III) Issuance or Allotment of Shares: the allotment of shares, without the approval of all the Shareholders;

(IV) Variation of Class Rights: the variation of the rights of any class of shares, which shall be done in accordance with the Articles and the Act;

(V) Borrowing: borrowing an amount exceeding ₦________, without the approval of a majority of the Shareholders;

(VI) Amendment of Constitutional Documents: the alteration of the Memorandum or Articles, which shall require a special resolution of the Shareholders in general meeting in accordance with the Act.

§ 13. APPOINTMENT AND REMOVAL OF DIRECTORS

13.1 A Director may be removed where any of the following circumstances occur:

________

13.2 A Director may be removed by the Company in general meeting, in accordance with Section 288 of the Act, in the following manner:

________

13.3 The appointment and removal of Directors shall in all cases comply with the requirements of the Act, including the giving of special notice and the right of the Director concerned to be heard.

§ 14. MEETINGS OF THE BOARD OF DIRECTORS

14.1 Board meetings shall be convened at regular intervals.

14.2 Save as otherwise provided in this Agreement, all decisions of the Board shall be by majority vote of the Directors.

14.3 Resolutions of the Board shall be validly passed where a quorum is present and, except as otherwise provided, by majority vote.

14.4 The quorum for a meeting of Directors shall be ________ Directors.

14.5 Where, within one hour from the time appointed for a Board meeting (or such other time as the Directors agree), a quorum is not present, the meeting shall stand adjourned to another day.

14.6 Each Director shall be entitled to one vote, cast by show of hands, and in the event of an equality of votes the Chairman shall have a casting vote.

14.7 A written resolution signed by all the Directors entitled to receive notice of a meeting shall be as valid and effectual as if passed at a duly convened Board meeting.

§ 15. MEETINGS OF THE SHAREHOLDERS

15.1 General meetings of the Company shall be held as follows:

(I) Annual General Meeting: The Company shall hold its annual general meeting in accordance with Section 237 of the Act within the period ________ in each year. All business transacted at the annual general meeting shall be deemed special, except the declaration of dividends, the consideration of the accounts, balance sheets and reports of the Directors and auditors, the election of Directors in place of those retiring, and the appointment and fixing of the remuneration of the auditors.

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15.2 At least twenty-one (21) days' written notice of any general meeting, stating the agenda, shall be given to the Shareholders in accordance with the Act, unless shorter notice is agreed in the manner permitted by the Act.

15.3 Resolutions shall be passed by the requisite majority of the Shareholders in accordance with the Act.

15.4 No business shall be transacted at any general meeting unless a quorum of members is present.

15.5 Save as otherwise provided, the quorum shall be ________ Shareholders present and entitled to vote.

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15.7 The Chairman shall preside at every general meeting; if the Chairman is not present within fifteen minutes or is unwilling to act, the Directors present shall elect one of their number to preside.

§ 16. AUDIT AND ACCOUNTS

16.1 The Company shall keep proper books of account and records in accordance with the Act and generally accepted accounting principles.

16.2 The financial year of the Company shall begin on 1 January and end on 31 December of each year, or such other period as the Directors may determine.

16.3 The Company shall appoint a qualified and independent auditor who shall audit the accounts of the Company at least once in every financial year.

16.4 The auditor shall be appointed and their remuneration fixed by the Shareholders at the annual general meeting in accordance with the Act.

16.5 The audited financial statements shall be prepared and laid before the Shareholders at the annual general meeting.

16.6 Each Shareholder shall have the right, on reasonable notice and during normal business hours, to inspect the books of account, records and other documents of the Company.

16.7 The Company shall, within a reasonable time, provide each Shareholder with copies of the annual audited financial statements and such other financial information as may reasonably be required.

16.8 The auditor shall have access at all times to the books, accounts and vouchers of the Company and shall be entitled to require from the Directors and officers such information and explanation as may be necessary for the performance of their duties.

16.9 The Company shall maintain its banking accounts with such bank or banks as the Directors may from time to time determine.

§ 17. FORCE MAJEURE

17.1 Neither Party shall be liable for any failure or delay in performing its obligations under this Agreement where such failure or delay is caused by events beyond its reasonable control.

17.2 Such events include, but are not limited to, acts of God, war, riot, civil commotion, insurrection, fire, flood, storm, epidemics, pandemics, government action, strikes, lockouts or other industrial action.

17.3 The affected Party shall, as soon as reasonably practicable, notify the other Party in writing of the event and the obligations affected.

17.4 The affected Party shall take all reasonable steps to mitigate the effect of the event and to resume performance as soon as possible.

17.5 The obligations of the affected Party shall be suspended for the duration of the force majeure event.

17.6 Where the force majeure event continues for a period exceeding ________, either Party may terminate this Agreement upon written notice, without liability arising therefrom.

§ 18. COVENANTS

18.1 The Parties covenant to take all necessary action to ensure that the Company conducts its Business efficiently and in accordance with this Agreement, the Memorandum and the Articles; to pay all relevant taxes, duties and charges in compliance with the law; and to take all steps to protect and enforce the Company's assets, intellectual property and other legal rights.

18.2 The Company shall provide the Shareholders with all necessary information, including financial statements, books of account and other documents as may be reasonably requested.

18.3 The Shareholders undertake to be bound by the terms and conditions of this Agreement.

§ 19. DIVIDEND POLICY

19.1 Dividends may be declared and distributed to the Shareholders by the Directors from time to time in accordance with the Act.

19.2 Dividends shall be paid only out of the Net Profit/Income of the Company, and the Directors shall determine the timing and form of any distribution.

§ 20. INDEMNITY

20.1 Each Party shall indemnify and hold harmless the other Parties against any loss, damage, expense or cost incurred as a result of the indemnifying Party's act, default or omission.

§ 21. NON-COMPETITION AND NON-SOLICITATION

21.1 The Shareholders agree not to, directly or indirectly, engage in any business in competition with the Company.

21.2 Directly or indirectly engaging in a competing business includes:

(I) engaging in business as an owner, partner or agent in competition with the Company;

(II) acting as an employee, director, adviser or independent contractor for any third party engaged in a similar business; or

(III) acting as an investor or promoter in any such similar business.

21.3 The Parties also agree not to solicit any client or customer of the Company, or to engage any employee, contractor or service provider of the Company.

21.4 This § 21 shall apply to each Party for so long as they remain a Shareholder and/or Director and for a period of ________ after they cease to be so, within the following geographical area:

________

21.5 The Parties agree that the restrictions in this § 21 are reasonable and necessary for the protection of the legitimate interests of the Company.

§ 22. CONFIDENTIALITY AND DATA PROTECTION

22.1 Each Party acknowledges that it may have access to Confidential Information and Trade Secret Information concerning the Company, and agrees to maintain the confidentiality of such information.

22.2 Confidential Information includes all information of whatever nature relating to the Business disclosed by a Party, whether in writing or orally, including documents, techniques, practices, tools, specifications, inventions, patents, trademarks, software, drawings and programmes, but excludes information which:

(I) is shown by written records to have been already known to the Receiving Party or the public at the time of disclosure;

(II) enters the public domain through no fault of the Receiving Party;

(III) is disclosed by the Disclosing Party to third parties without restriction;

(IV) is lawfully received by the Receiving Party from a third party entitled to disclose it; or

(V) is required by law or by a competent authority to be disclosed.

22.3 Trade Secret Information includes all formulae, patterns, designs, processes, methods and other information not generally known or readily ascertainable by the public.

22.4 The Parties agree:

(I) to take reasonable measures to ensure the confidentiality of the information;

(II) not to publish or disclose, in whole or in part, any information relating to the practice, business dealings or affairs of the Company without the requisite consent; and

(III) not to use the Confidential Information for any purpose other than the purpose of this Agreement.

22.5 The obligations in this § 22 shall continue during and after the termination of this Agreement for so long as the information remains confidential or a trade secret.

22.6 Each Party shall, in the processing of any personal data in connection with this Agreement, comply with the Nigeria Data Protection Act 2023 and all applicable data protection regulations, and shall implement appropriate technical and organisational measures to safeguard such personal data.

§ 23. TERMINATION

23.1 This Agreement shall commence on the Effective Date and continue in force until any of the following occurs:

(I) a Shareholder ceases to be a Shareholder of the Company as a result of the transfer or sale of all of their shares;

(II) the Shareholders agree in writing to terminate this Agreement;

(III) the bankruptcy of all the Shareholders; or

(IV) the voluntary or involuntary dissolution of the Company.

23.2 Termination shall be without prejudice to any rights or obligations accrued prior to termination, and § 20, § 21 and § 22 shall survive termination.

§ 24. WINDING UP

24.1 The Company may be wound up voluntarily upon a special resolution of the Shareholders in accordance with the Act. Upon winding up, a liquidator may be appointed who shall apply the assets of the Company in the following order:

(I) in settlement of all taxes, debts and liabilities of the Company;

(II) in payment of the costs and expenses of the winding up; and

(III) the surplus (if any) shall be distributed among the Shareholders in proportion to their shareholding.

24.2 The liquidator may determine how any such distribution shall be carried out among the Shareholders or different classes of Shareholders.

24.3 The liquidator may, with the sanction of the Company, vest the whole or part of the assets in trustees upon such trusts for the benefit of the contributories as the liquidator thinks fit.

§ 25. DISPUTE RESOLUTION

25.1 The Parties shall use their best endeavours to settle amicably, through negotiation, any dispute arising out of or in connection with this Agreement.

25.2 Any dispute not resolved within thirty (30) days shall be referred to and finally resolved by arbitration in accordance with the Arbitration and Mediation Act 2023.

25.3 The arbitral tribunal shall consist of ________ arbitrator(s) appointed by agreement of the Parties or, failing agreement, in accordance with the said Act.

25.4 The seat and venue of the arbitration shall be:

________

25.5 The language of the arbitration shall be English, and the award of the tribunal shall be final and binding on the Parties and enforceable by any court of competent jurisdiction.

§ 26. GENERAL PROVISIONS

26.1 Governing Law: This Agreement shall be governed by and construed in accordance with the laws of the Federal Republic of Nigeria, and the Parties submit to the jurisdiction of the courts of ________.

26.2 Notices: All notices under this Agreement shall be in writing and delivered personally, by courier, by registered post or by electronic mail to the addresses set out below:

In the case of the Company:

________

Address: ________

Attention: ________

Email: ________

In the case of Shareholder 1:

________

Address: ________

Email: ________

In the case of Shareholder 2:

________

Address: ________

Email: ________

26.3 Cumulative Rights: The rights of the Parties are cumulative and not exclusive, except as otherwise provided by law.

26.4 Headings: Headings are for convenience only and shall not affect the interpretation of this Agreement.

26.5 Entire Agreement: This Agreement, together with the Memorandum and Articles, constitutes the entire agreement between the Parties and supersedes all prior written or oral agreements.

26.6 Waiver: Any term may be waived only in writing by the Party entitled to the benefit thereof; no delay or omission in exercising any right shall constitute a waiver.

26.7 Variation: No variation of this Agreement shall be effective unless made in writing and signed by or on behalf of all the Parties.

26.8 Severability: If any provision of this Agreement is held to be unenforceable, the remaining provisions shall continue in full force and effect.

26.9 Further Assurance: The Parties shall execute and deliver all such documents and take all such actions as may be necessary or incidental to give effect to this Agreement.

26.10 Counterparts: This Agreement may be executed in any number of counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement.

IN WITNESS WHEREOF the Parties have executed this Agreement in the manner appearing below on the day and year first above written.

THE COMMON SEAL of the within-named Company ________

was hereunto affixed in the presence of:

________________________

DIRECTOR

Name: ________

________________________

DIRECTOR/SECRETARY

Name: ________

SIGNED by the within-named Shareholder 1

______________________

________

in the presence of:

Name: ________

Address: ________

Occupation: ________

Signature: ........................................................................

SIGNED by the within-named Shareholder 2

______________________

________

in the presence of:

Name: ________

Address: ________

Occupation: ________

Signature: ........................................................................