Shareholders’ Agreements

For businesses with two or more shareholders, you should consider implementing a shareholders’ agreement.

For businesses with two or more shareholders, we would strongly urge them to consider implementing a shareholders’ agreement. However, a common question we’ll get asked is: what is a shareholders’ agreement?

This agreement is effectively a contract between all company shareholders to help govern the relationship, rights, rules and responsibilities for each shareholder to abide by. Effectively it ensures all parties are on the same page about what to do in potential events that may arise in the future to avoid disagreements and deadlocks.

What is Covered Within a Shareholders’ Agreement?

It’s important to note that a shareholders’ agreement should be tailored to the desires of the shareholders rather than a boilerplate document. As a result, the ideal shareholders’ agreement will vary from company to company, however, here are examples of some of the questions that a shareholders’ agreement may answer:

  • What are the rights of the shareholders?
  • How are important future decisions made?
  • How are disputes resolved?
  • What happens if a shareholder wants to leave the company? How should their shares be dealt with?
  • What is the framework for any future sale/exit?
  • How are any minority shareholders protected?
  • What are the drag-along/tag-along rights?
  • How are shares bought or sold?
  • How are profits distributed?
  • What would happen if a shareholder dies?

This isn’t an exhaustive list as the agreement aims to cover any potential issues that the shareholders deem important enough to warrant creating a legal obligation by including them within the agreement.

How can The Smart Accountants help?

Working with solicitors where necessary, our shareholder agreement experts can prepare this agreement for you, including discussing the various elements, your desires and providing recommendations and advice on what you should include. Often this process will work out as follows:

  • Initial Q&A/Checklist (see below)
  • First draft provided for review
  • Conference call to discuss queries and amendments
  • Second draft provided for review
  • Conference call to discuss further (if needed)
  • Finalised agreement for signing

Download our Shareholders’ Agreement Checklist

The starting point for us to help create the first draft of this agreement is to understand each factor of the business and shareholders that is pertinent to the agreement. Often as well as a virtual meeting, we’ll use a Shareholders’ Agreement Checklist which you can download below:

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Shareholders’ Agreements  FAQ’s

Can you write your own agreement and should you write your own shareholders’ agreement will get different answers. Can you write your own agreement? Yes. You will also be able to find boilerplate templates online that can assist you with this.

However, should you write your own agreement? Probably not. A shareholders’ agreement is intended to avoid major issues down the line, so it’s crucially important that you get this right so that it’s bespoke to your company and covers all the scenarios you may encounter further down the road. Therefore, we would recommend seeking professional advice and support here.

The short answer is legally no, but if you have more than one shareholder then it would be advised for all the reasons detailed on this page. If no shareholders’ agreement is in place, then the generic Companies Act 2006 and the default company constitutional rules apply which are unlikely to cover the bespoke concerns and risks that will be important to each shareholder.

It’s not uncommon that these will be confused as they both cover similar, and often overlapping, topics. However, whilst they both have a similar aim, which is to help govern how the business is run internally and to reduce the change of disputes, here are a couple of key differences:

  • Unlike with shareholders’ agreements, every UK limited company is required to have articles of association by law. The articles of association can also be viewed publicly on Companies House, but the shareholders’ agreement can be kept private.
  • Articles of associations will follow a similar format, given there are rules on what it must include. However, this isn’t the case for a shareholders’ agreement as the shareholders can choose what they want the agreement to cover.

It’s not uncommon that potential issues are covered in both documents, so there is the potential to have a supremacy clause within the shareholders’ agreement so that its stance on the issue takes priority.

No – whilst we would advise new companies to introduce a shareholders’ agreement at the start of their lifecycle to provide clarity and protection from the off, it’s not too late to draft one at a later date. Many businesses overlook this at inception, but it’s better late than never.

This can only be amended with the consent of all the shareholders, so for example, if all shareholders consent, the dividend policy can be amended. As such, this allows you as shareholders to ensure the agreement remains fit for purpose as opposed to a static document.

If a new shareholder joins then they will commonly be required to sign a Deed of Adherence. This is effectively an agreement that they will be bound by the provisions and conditions of the existing shareholders’ agreement.

The Next Steps

If you would like further information on Shareholders’ Agreements and to discuss how we can support you, please get in touch and one of our specialists will be happy to talk to you.

Please call us on 0845 606 9632, email us at or complete the contact form below.