Many small business owners incorporate their company, split shares between founders, and carry on without ever putting a shareholder agreement in place. This is a significant and common mistake.
What is a shareholder agreement?
It is a private contract between the shareholders of a company. Unlike the Articles of Association — which are a public document filed at Companies House — a shareholder agreement is confidential and can cover any matters the parties agree.
Why do you need one?
Without one, you rely entirely on the Companies Act 2006 and the company’s Articles of Association. These do not address everything — particularly what happens if shareholders fall out, a founder wants to exit, or someone dies or becomes unable to work.
What should it cover?
Key provisions include: decision-making thresholds, dividend policy, share transfer restrictions (pre-emption rights), drag-along and tag-along rights, founder vesting schedules, non-compete clauses, and dispute resolution mechanisms.
When should you get one?
Ideally at the point of incorporation or when a new investor or co-founder joins. The earlier the better — it is far harder to negotiate terms once a dispute has already arisen.
I can draft or review shareholder agreements at a fixed fee. Book a call to discuss your specific situation.
UK solicitor at Farani Taylor Solicitors practising immigration, property conveyancing and corporate law. Fluent in English, Urdu, Hindi and Punjabi.