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Company Documentation Section 6 Once the structure of the company has been settled and it has been decided how many shares each party will have and funding secured, the next stage is for such agreement to be documented. This is normally done through a Shareholders' Agreement and the Articles of Association of the company. This section sets out briefly some of the usual provisions which are found in such documents. The key point to bear in mind throughout is the purpose of the documents. At the most basic level, they are a record of how the relationship between the parties is intended to function in terms of the operation of the company (ie the obligations and the rights of each party). However, the documents also protect the Investor's investment. These matters are looked at in greater detail below. Shareholders' Agreement At the most basic level, the Shareholders' Agreement is the document which sets out the terms on which the parties will subscribe for shares in the company (eg the number of shares for which each party will subscribe and the price which must be paid for such shares). It also sets out the main terms of the arrangements between the shareholders and as to the conduct of the affairs of the company following completion of the investment. These will be aimed at providing various protections for an Investor and will usually cover the following areas: n Information – An Investor will require management and financial information so that it may monitor the progress of the company. The Shareholders' Agreement is likely to specify the provision to the Investor of a monthly management accounts pack and statutory accounts, together with minutes of all board meetings and shareholder meetings and such other information concerning the business as it may reasonably request. An Investor also usually requires the preparation and agreement of formal financial budgets for each financial year of the company, which the Investor must approve in advance. Such information is required by an Investor primarily so that it can fulfil its responsibility to monitor its investments. If there appear to be problems in the business, it can intervene and offer guidance to the management team at an early stage to help get the business back on track. 36