Shareholders Agreement Solicitors

To decide, in advance and in private, the questions that otherwise become disputes: how the company is controlled, how profit is shared, how shares are valued and transferred, and what happens when a shareholder leaves, dies or falls out with the others. It also fills the gaps company law leaves, particularly for minority shareholders, whose statutory protections are limited. The agreement is confidential between the parties, unlike the articles, which are filed publicly at Companies House.

The articles of association are the company’s public constitution, binding the company and its members under the Companies Act 2006 and amendable by special resolution, meaning a 75% majority can change them. A shareholders agreement is a private contract, binding only those who sign it, confidential, and amendable only with the agreement of its parties, which is precisely what makes it the stronger protection for a minority. The two documents overlap on transfers and consents, and they must be drafted to work together, with a conflicts clause stating which prevails.

Those are the companies that need one most. The closer the relationship, the less gets written down, the more is assumed, and the more painful the dispute when assumptions diverge, which is why family and founder fallouts dominate shareholder litigation. An agreement made while everyone trusts each other is quick to negotiate and cheap to draft. The same conversation five years later, through solicitors, costs many times more and sometimes costs the company itself.

The protections company law does not provide by default: consent rights over fundamental decisions such as issuing shares, changing the business or altering the articles, guaranteed information and accounts, an agreed dividend policy, anti dilution protection, and tag along rights ensuring the minority can exit on the same terms if the majority sells. Without an agreement, a minority's principal remedy is an unfair prejudice petition after the damage is done. With one, most of the conduct that founds such petitions is prevented or made a straightforward breach of contract.

Terms governing what happens to a shareholder’s shares when they leave the company, typically requiring a transfer and fixing the price by reference to how they left. A good leaver, for example one who retires or leaves through ill health, commonly receives fair value; a bad leaver, for example one dismissed for cause or leaving in breach, may receive a discounted price. The definitions and the valuation mechanics are heavily negotiated, because they decide the cost of every future departure.

Breach is a breach of contract, giving rise to claims for damages and, where damages are inadequate, injunctions restraining the breach or specific performance compelling compliance, for example with pre emption obligations. The same conduct frequently supports an unfair prejudice petition, because the agreement defines what the shareholders were entitled to expect. Enforcement is handled by our shareholder disputes team, and a well drafted agreement makes their job short.

We quote fixed fees for every stage, agreed before any work starts, at prices around 30% cheaper than a standard law firm, whether that is drafting an agreement from scratch, reviewing one you have been sent, or updating and aligning existing documents as the company grows. Measured against the cost of a single shareholder dispute, an agreement is reliably the best value document in the company’s records.