Overview
A shareholder agreement is a legally binding document between the shareholders of a corporation.
Full Details
A Complete Guide to Shareholder Agreements
A Shareholder Agreement is a private contract between a company’s shareholders that defines how the business is owned, managed and operated. It complements the Articles of Association and helps prevent disputes by setting clear rules around decision-making, profit distribution and share transfers.
Unlike the Articles of Association (which are public and filed with Companies House), a Shareholder Agreement is confidential - giving shareholders greater control over internal matters and protection for minority interests.
This guide explains what a Shareholder Agreement covers, why it’s important, and how to create one that meets UK legal standards.
CONTENTS
A Shareholder Agreement is a legally binding document that outlines the rights, responsibilities and obligations of a company’s shareholders. It governs how decisions are made, how shares are issued or transferred and how disputes are resolved.
The agreement works alongside the Articles of Association but provides more detail and flexibility, particularly for private limited companies. It allows shareholders to agree on how the business will be run without public disclosure.
In essence, it creates a clear framework for collaboration - ensuring all shareholders understand their roles, reducing the risk of misunderstandings and protecting the interests of both majority and minority owners.
A Shareholder Agreement isn’t a legal requirement, but it’s one of the most effective tools for protecting a company’s long-term stability and shareholder relationships.
Without one, the company relies solely on the Companies Act 2006 and its Articles of Association - which may not provide enough flexibility or personal protection.
A Shareholder Agreement is important because it:
- Prevents and resolves disputes by defining processes for decision-making.
- Protects minority shareholders from being overruled by larger investors.
- Provides clarity on dividend policies, management roles, and voting rights.
- Sets out what happens if a shareholder wishes to sell or leave the company.
- Maintains privacy over sensitive ownership terms (unlike public filings).
The exact contents depend on the size and structure of the company, but certain key provisions appear in most agreements.
A typical Shareholder Agreement should include:
- Shareholder details: Names, addresses and ownership percentages.
- Purpose and objectives: Why the agreement exists and its scope.
- Voting rights and decision-making: Rules for board meetings and major resolutions.
- Dividend policy: How and when profits are distributed.
- Share transfers: Conditions for selling, issuing or transferring shares.
- Minority protection clauses: Preventing unfair treatment or dilution of rights.
- Dispute resolution procedures: Methods such as mediation or arbitration.
- Non-compete and confidentiality clauses: Protecting company interests.
- Exit provisions: What happens if a shareholder resigns, dies or sells shares.
- Governing law and jurisdiction: Typically English law for UK companies.
A Shareholder Agreement is particularly valuable for smaller companies and startups where relationships between founders and investors are key.
You should consider putting one in place when:
- Forming a new company with two or more shareholders.
- Admitting new investors or business partners.
- Making changes to shareholding structure or management roles.
- Resolving disagreements between shareholders.
- Protecting minority shareholder rights or setting clear exit strategies.
Without one, even small misunderstandings can escalate into legal disputes or deadlocks that damage the business.
While there’s no statutory requirement to have a Shareholder Agreement, once signed, it becomes a binding contract enforceable by law.
To be legally valid, a Shareholder Agreement must:
- Be in writing and signed by all shareholders.
- Clearly identify the parties and their respective shareholdings.
- Avoid conflicting with the company’s Articles of Association.
- Comply with the Companies Act 2006 and UK contract law.
- Include a governing law clause (England and Wales for UK companies).
Because it’s private, a Shareholder Agreement isn’t filed at Companies House - but it holds the same legal force as any other contract.
Drafting a Shareholder Agreement requires careful consideration of the company’s structure and the balance between shareholder rights and management control.
The general process involves:
- Identify all parties: List every shareholder and confirm their shareholdings.
- Define key terms: Clarify voting rights, dividend policy and management structure.
- Agree on share transfer rules: Outline conditions for selling or issuing shares.
- Add dispute resolution procedures: Include mediation or arbitration to handle disagreements.
- Review alongside the Articles: Ensure there are no conflicts between the two documents.
- Sign and store securely: Each shareholder should retain a signed copy for reference.
The cost depends on the complexity of the company structure, number of shareholders and the level of legal input required.
Typical options include:
- Solicitor drafted: £500–£1,500 depending on complexity and clauses required.
- Corporate law specialists: £300–£800 for tailored agreements.
- Online platforms: £50–£200 for solicitor-reviewed templates suitable for small businesses.
Shareholder Agreement
The example below provides a simple overview of how a Shareholder Agreement is typically structured and the type of clauses it usually contains. Actual content may vary depending on your company’s share structure, the number of shareholders, and your specific governance requirements.
This Agreement is made on [date] between the shareholders of [Company Name], incorporated in England and Wales under company number [Company Number].
The parties agree to regulate their rights, responsibilities and ownership of the Company as follows:
1. Share OwnershipEach shareholder holds the following shares in the Company:[Shareholder Name]: [number] shares
[Shareholder Name]: [number] shares
2. Decision-MakingCertain decisions will require:Ordinary Resolution – simple majority
Special Resolution – at least 75% approval
3. Roles and Responsibilities
Shareholders agree to act in good faith and in the best interests of the Company.
4. Transfer of Shares
No shares may be transferred without first offering them to existing shareholders, unless otherwise agreed.
5. Directors and Management
The Company’s business will be managed by its Directors, appointed according to this agreement.
Signed by the Shareholders on [date]:
Shareholder 1:
Name: ____________________________
Signature: ________________________
Shareholder 2:
Name: ____________________________
Signature: ________________________
Robot Lawyer provides a solicitor-verified Shareholders’ Agreement template designed for UK companies. It includes standard protections and can be tailored to the needs of startups, SMEs or investment-backed businesses.
Unlike free examples, our template is compliant with UK company law and structured to balance majority and minority interests.
Create a professional Shareholder Agreement — with Robot Lawyer.
Start the questionnaire to generate your document
Is a Shareholders’ Agreement legally required?
No. Companies can operate without one, but they risk disputes and lack of protection for minority shareholders.
How is a Shareholders’ Agreement different from Articles of Association
Articles are public and required by law; a Shareholders’ Agreement is private and adds extra rules shareholders agree on.
Can a Shareholders’ Agreement override the Articles?
No. If there’s a conflict, the Articles take priority. Both should be aligned.
Who should sign a Shareholders’ Agreement?
All shareholders should sign so it is binding on everyone.
Can new shareholders be added later?
Yes, but they must agree to and sign the existing agreement or a new one.
Can a Shareholders’ Agreement be changed?
Yes, but all shareholders must consent to the amendments.
Why use Robot Lawyer’s Shareholders’ Agreement template?
It is solicitor-verified, clear, and tailored to UK law - providing protection at a fraction of traditional costs.
Need a Shareholder Agreement for your company? Robot Lawyer makes it fast and affordable to create solicitor-verified documents.
How it works:
1. Select Create Document ➝ below and start the questionnaire.2.Answer a few quick questions about your company.
3. Instantly receive a solicitor-verified Shareholder Agreement.
4. Save, sign and store it securely.
Shareholder Agreement
Start the questionnaire to generate your document
Solution