Shareholders' agreement toolkit

You should use this toolkit if:

• your company has more than one shareholder;
• your company has only one class of ordinary shares;
• you do not currently have a shareholders’ agreement;
• your company currently uses the model articles of association;
• and you want to enter into a shareholders' agreement to manage the relationships between the shareholders and between the shareholders and the company.

It can be used when you first set up your company or at any time after your company has been set up. You can also use this toolkit if you have a new share investor.

If you are not sure whether your company uses the model articles, you can check your company’s record online at Companies House.

If you are also issuing shares to a new share investor, see Issuing Shares.

This toolkit contains all the documents you need to enter into a shareholders' agreement and new articles, and to obtain the appropriate board and shareholder approvals.

It covers the relationship between the company, existing shareholders and any new share investor, including whose consent is required for major decisions affecting the company.

The shareholders' agreement is flexible and can be modified to cover your requirements.

Without a shareholders’ agreement in place, you may face disagreements between your shareholders on matters such as:

• when your board should get shareholders’ approval;
• how important decisions should be made;
• what happens when your business is sold.

In the absence of a shareholders’ agreement, unless a matter specifically requires shareholder approval under company law or under the terms of your articles of association, it will be decided at board level by default. This can be undesirable for certain key or sensitive decisions.

If ownership of your company is shared evenly (for instance a 50:50 jointly owned company), without a shareholders’ agreement there is a chance of deadlock occurring. In the absence of a shareholders’ agreement, if the joint owners of a company disagree on a certain matter, it can be very difficult to find a solution. A shareholders’ agreement seeks to preempt this by clearly allocating responsibility for decisions on certain key matters, and including a mechanism for resolving any deadlock which might occur.

It is standard practice to update your articles at the same time as entering into a shareholders’ agreement. The articles of association in this toolkit work together with our shareholders’ agreement to ensure that your company and shareholders are all bound by the same set of provisions.

The board and shareholder resolutions in this toolkit ensure that all the necessary decisions receive formal approval.

For more information about shareholders’ agreements, including the process you need to follow to sign up to one and the documentation to approve it, and your new articles of association, see Shareholders’ agreement.

For further guidance on the practical considerations you should have in mind when agreeing legal terms with a new share investor, and the legal process you need to follow, see Agreeing legal terms with a new share investor.