What it is
A shareholders agreement is a document entered into between the shareholders of a company, alongside the company's memorandum or articles of association and trade licence. It is generally used to record matters that the shareholders want agreed between themselves, in addition to what is captured in the company's constitutional documents.
It is commonly used by companies with more than one shareholder — including joint ventures and family or partner-owned businesses — to set clear expectations from the outset about how the company will be run and how key decisions and disagreements will be handled.
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What it commonly contains
The right content depends on the number of shareholders, their roles in the business and how much control each wants over particular decisions; a document should be tailored to the company rather than copied from another business.
- How major decisions will be made and which matters require shareholder approval.
- How profits, funding needs and further investment will be handled.
- Restrictions or procedures for transferring or selling shares.
- What happens if a shareholder wants to exit or if the shareholders cannot agree.
- Confidentiality and, where relevant, restrictions on competing activities.
- How disputes between shareholders will be approached.
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Before you sign
- 1Check the agreement is consistent with the company's memorandum or articles of association and licence.
- 2Confirm decision-making and voting arrangements reflect what was actually discussed.
- 3Review how share transfers and exits are to be handled.
- 4Check how disagreements between shareholders are intended to be addressed.
- 5Confirm each shareholder's contribution, role and expectations are accurately described.
- 6Take advice before signing, particularly for a new business or where shareholders hold significantly different stakes.
