Running a recruitment agency means you’re not just calling the shots, but you also enjoy the profits, dividends, and value if the business gets sold. If you are the sole director and shareholder, then life is simple. However, if there is more than one shareholder, it’s wise to consider the future and how you’ll work together. That’s where a shareholder agreement comes in.
What is a shareholder agreement?
A good way to think of it is as a playbook for your business head honchos. It’s a legally binding contract between people who own the shares in the company. It lays out everyone’s rights, responsibilities, and expectations like a partnership agreement, but with some legal muscle.
A good shareholder agreement is there to protect everyone’s investments, make working relationships fairer, and help govern how key decisions are made.
Can’t we just have a verbal agreement and handshake instead?
Sure, you could, but as your agency grows, informal agreements can become a breeding ground for misunderstandings. Putting it in writing removes guesswork, eliminates ambiguity, and prevents potential headaches down the line.
What’s usually put into a shareholder agreement?
Most shareholder agreements cover some or all of the following:
- Dividend Distributions – the when, what, and how shareholders get paid.
- Decision making – who has the final say on big decisions
- Good Leaver – What happens to the shares if/when someone leaves on good terms
- Bad Leaver – What happens to the shares if someone leaves on bad terms (e.g. misconduct)
- Sale of Shares – who can buy/sell shares (inside or outside of the company)
- Death/Illness/incapacity – what happens to the shares in the unfortunate sicario when a shareholder can no longer work due to serious illness or death?
These clauses provide clarity and peace of mind when life throws unexpected curveballs.
What happens if you don’t have one?
Without a shareholder agreement, there’s no roadmap if someone wants out—or worse. Disputes can quickly escalate, often leading to awkward and expensive mediation.
Important Tip: Even if you have a shareholder agreement in place, it’s worth reviewing regularly. As your business evolves, so too might your requirements.
So, we should have one?
Absolutely, if you have more than one shareholder in your recruitment agency.
At MAYACHI, we work with numerous recruitment agencies with multiple directors and shareholders. We help figure out exactly what should go into your agreement—because no two businesses (or recruiters) are alike.
If you don’t have one yet, let’s talk. We offer a complimentary consultation where we walk you through shareholder agreements and other financial essentials to protect your business.
Don’t wait for tomorrow and start protecting your shares today!