You probably have an idea of what a shareholder agreement is. But why should you have a shareholder agreement before issuing even a single share in a small business? Why pay for a professional to prepare a shareholder agreement when you are family or very close friends.
Private equity investment is where a company seeks to bring in new outside investors by issuing new shares. Note that this is different from a transfer of existing shares. The procedure is called an allotment of shares. This is because there is first a letter from the proposed investor applying to buy the shares. The shares are then “allotted” or “allocated” to that shareholder. When the investor’s details are entered into the register of members they are issued with the shares and are shareholders. They then get a share certificate.