Do You Need a Shareholders Agreement? Here’s What to Include
- Jackie Atchison
- 3 days ago
- 2 min read
Intro
Starting a business with others is exciting—until there’s a disagreement, someone wants out, or things don’t go to plan. That’s when a shareholders agreement stops being a “nice to have” and becomes essential.
This post breaks down what a shareholders agreement is, when you need one, and what it should cover to protect the business and everyone involved.
Why It Matters
A company constitution sets out the basic rules. But it doesn’t deal with the day-to-day realities of running a business with others—like decision-making, exits, disputes or what happens if someone stops contributing.
A shareholders agreement gives you a clear framework for how the business is owned, governed, and managed. Without one, you’re relying on assumptions, memory, or default rules that may not reflect your intentions.
What You Need to Know
When to Put One in Place
Starting a company with co-founders or investors
Bringing in a new shareholder
Planning for growth, succession, or future exits
Dealing with passive shareholders or family shareholders
It’s best to have the agreement signed before—or as close as possible to—the share issue.
What It Should Cover
Ownership and Share Structure - Who owns what percentage, and on what terms? Are there different share classes with different rights?
Board and Decision-Making - Who makes what decisions? What requires unanimous consent? Can directors also be shareholders?
Capital Contributions and Funding - Are shareholders expected to contribute funds, provide loans, or offer guarantees? What happens if one refuses?
Profit Distribution and Dividends - How are profits distributed? Is reinvestment required? Are dividend policies agreed upfront?
Transfers, Exits and Tag/Drag Rights - What happens if a shareholder wants to sell, leaves the business, or passes away? Can others buy their shares? Can they force others to join a sale?
Disputes and Deadlocks - If directors or shareholders disagree, what’s the resolution process? Mediation? Buy-sell clauses? Share buyback?
Restraints and Competing Interests - Can a shareholder start a competing business? What’s off-limits during and after involvement?
Tip: A shareholders agreement should complement your company constitution—not conflict with it.
Commercial Insight
Most shareholder disputes don’t start out as hostile—they evolve from mismatched expectations. A clear agreement helps everyone make decisions faster, plan for changes, and keep business relationships intact.
It also shows investors and key stakeholders that your business has a solid foundation.
What to Do Next to Sort Your Shareholders Agreement
If you’re setting up a new company, raise the agreement early
If you already have shareholders, review how decisions are made and what happens if someone wants out
Make sure your company constitution and shareholders agreement work together
Get legal advice to ensure key risks are addressed clearly and commercially
Closing Wrap
I help business owners put shareholders agreements in place that protect the business and support long-term success. If you're starting or restructuring a company and want the right foundations in place, I can help.
