Shareholder Agreements

A shareholder agreement sets out what happens before you need it: how decisions get made, what happens if someone wants to leave, and how disputes get resolved.

Putting one in place early can save a great deal of difficulty later.

Shareholder relationships can be a lot like a business marriage: built on trust, shared ambition and the belief that everyone’s working towards the same future. When that breaks down, it can be just as personal, disruptive and difficult to untangle, particularly where the parties are still financially tied to the business. Shareholder disputes are costly, drawn out and complicated.

A shareholder agreement can feel like an unexpected cost when you’re starting out, but the benefits far outweigh that cost. We can draft one for you, or review one you’ve been asked to sign.

What a shareholder agreement covers

• Key decisions that need shareholder agreement, and how they’re made
• Rules around transferring shares
• Succession planning
• How disputes get resolved, including deadlock provisions
• Funding obligations: whether shareholders need to provide further investment, loans or guarantees
• The roles and responsibilities of shareholders who are also directors or employees
• Protections for majority and minority shareholders
• How dividends and profits are dealt with
• Exit provisions: what happens on death, incapacity, retirement, dismissal, or if a shareholder simply wants to leave
• Protecting confidential information and restricting unfair competition

When to put one in place

You can enter into a shareholder agreement at any time, but we usually recommend doing it at the start of the business, or when new shareholders join, while everyone’s still aligned on the details.

Why you shouldn’t leave it too late

Shareholder disputes can mean significant legal fees for everyone involved, and they can lead to a breakdown in the relationship between shareholders that’s impossible to put right. It’s far easier to agree the details while everyone’s still on the same page.

It’s a common misconception that a shareholder agreement is a standard contract. While there are clauses that come up regularly, every agreement we draft is tailored to the company and the people involved. It acts as the blueprint for the whole business, so it needs to genuinely reflect what’s been agreed. Once it’s in place, it’s often necessary to update the company’s articles of association to match.

Shareholder disputes are far easier to resolve on paper, before they happen, than they are in person, after they have.