In many businesses and organizations, formal shareholders agreement is commonly put in place, even if it is not a legal requirement to do so. There are many benefits to having one, however. Companies are given the security of knowing that the operations of the business and the responsibilities the shareholders have are already taken into full consideration. Everyone within the organization will therefore understand what is allowed or disallowed and are informed of how decisions within the organization are to be made. This reduces the incident of conflicts that may arise between shareholders that could potentially disrupt operations and hurt the profitability of the business.
Many businesses, however, tend to delay drafting an agreement when they first start a new company. While this is not normally an issue, it makes better business sense to have one in place in the near future as different shareholders are bound to have differing opinions on how businesses should be managed. In addition, circumstances such as the economy can change. Misunderstandings can occur where shareholders disagree over profits sharing; leading to fracturing of the company and unnecessary stress.