What should be covered in a shareholders’ agreement?

By Harrison Drury

02 Sep 2013

Harrison Drury's David Filmer gives an overview of what should be included in a shareholders' agreement.

Put simply, a shareholders’ agreement is designed to regulate the relationship between shareholders in relation to a company’s affairs.

Though the content of a shareholder’s agreement will vary depending on factors such as the size of the business and the nature of its work, it will typically cover issues such as the ownership of shares, rules surrounding being a director in the business, shareholder policies and obligations, and such things as what will happen upon the death of a shareholder.

A shareholders’ agreement will often be read in conjunction with a company’s articles of association (the constitutional document of a company) and directors’ service agreements, which are effectively a contract of employment between the company and a director.

Before getting bogged down in the legal language, the starting point is deciding on what issues the agreement should cover. Typically this will include:

Shares, shareholders and transfer of shares

The agreement should cover such issues as the proportions in which the shareholders will hold shares, if there will be different classes of shares, and if these different classes of shares will have different voting rights. It should also detail what happens when a company issues new shares and the circumstances in which a shareholder may be permitted to transfer his shares.

Directors and directors’ meetings

Where the shareholders are also the directors of the company, a shareholders’ agreement may also seek to govern the conduct of the directors.

This could include detail on the minimum number of directors required for a directors’ meeting to validly transact business, how often directors meetings take place, and who should be granted a casting vote in the event of equal voting.

Shareholder policies and consents

The shareholders’ agreement will also spell out any policies required in relation to matters such as approval of business plans, dividends, working capital, long-term finance and loan capital, and shareholders’ guarantees of borrowings.

It should also outline circumstances and situations where the consent of all shareholders is required or when a majority vote / the vote of one shareholder will suffice. Examples would be the issue of new shares, introduction of new shareholders, alterations to share capital, a change in the nature of the company’s business, expansion into new geographical areas, the signing of major contracts, or a sale of assets by the company.

Other matters

A shareholders’ agreement should also make provision for the following:

• Non-competition covenants: These are given by shareholders not to compete against the company for a specified period after ceasing to be a shareholder • Confidentiality clauses: These should be effective during and after ceasing to be a shareholder • Obligations of shareholders: This covers issues such as time to be devoted to the business by shareholders, duty to maintain insurance policies and duty to maintain control of the company’s assets, and so on • Breach of shareholders’ agreements: Covering what happens in the event of a breach. • Death of a shareholder: Details on what happens to a shareholder’s shares in the event of death • Valuation and payment shares: Detail on how shares are to be valued and how these will be paid, for example as a lump sum or in instalments

This is by no means an exhaustive list of what should be included in a shareholders’ agreement, as requirements will vary from business to business. We would strongly recommend that you always seek professional legal advice in drafting shareholders’ agreements.David FilmerHarrison Drury

Latest news

1

Three weekly domestic waste collection considered in plans Waste recycling Blackpool

Three weekly domestic waste collection considered in plans

01 Jul 2025

2

Graham Engineering confirms acquisition to a2e Industries Graham Engineering

Graham Engineering confirms acquisition to a2e Industries

01 Jul 2025

3

Training 2000 celebrate 'Good' rating by Ofsted Training 2000

Training 2000 celebrate 'Good' rating by Ofsted

01 Jul 2025

4

Fox Group acquires J Fisher and Sons Colin Fisher, Paul Fox CEO and Gary Fisher.

Fox Group acquires J Fisher and Sons

01 Jul 2025

5

Beever and Struthers strengthen leadership team with new partners Dean Curtis and Joe Diston

Beever and Struthers strengthen leadership team with new partners

01 Jul 2025

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
LBV123 July/August Launch Event
Lancashire Business View magazine launch
Networking
16 Jul 2025

LBV123 July/August Launch Event

Burnley

08:30 - 10:30

Lancashire Built Environment Conference 2025
BEC 315 X 315 Px
Networking
25 Sep 2025

Lancashire Built Environment Conference 2025

Blackpool Football Club, Blackpool, FY1 6HX

08:30 - 13:00

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

Business Bike Club – July
Chamber Logo1.png.png
LBV Hub Networking
01 Jul 2025 - 01 Jul 2025

Business Bike Club – July

Various, Lancaster, LA

08:00 - 09:30

Chamber Breakfast Networking – July
Chamber Logo1.png.png
LBV Hub Networking
02 Jul 2025 - 02 Jul 2025

Chamber Breakfast Networking – July

St John's Hospice, Slyne Road, Lancaster, LA2 6ST

08:00 - 10:00

The Marketing Metrics that Matter – July 4
LBV Hub Seminars
04 Jul 2025 - 04 Jul 2025

The Marketing Metrics that Matter – July 4

Door4 Office, Burnley Wharf, Burnley, BB11 1JG

08:30 - 11:00

Tri-Site Survey Equipment Showcase
unnamed (2).jpg.jpg
LBV Hub Seminars
09 Jul 2025 - 09 Jul 2025

Tri-Site Survey Equipment Showcase

Crow Wood Hotel, Burnley, BB12 0RT

09:30 - 16:00

Chamber Summer BBQ
LBV Hub Social
17 Jul 2025 - 17 Jul 2025

Chamber Summer BBQ

The Borough, Dalton Square, Lancaster, LA1 1PP

17:30 - 20:00

Preston Tech Connection: Web3 is Dead. Or is It?
July Longer Banner.jpg.jpg
LBV Hub Networking
29 Jul 2025 - 29 Jul 2025

Preston Tech Connection: Web3 is Dead. Or is It?

Society1, Coworking Space, Preston, PR1 3LT

18:00 - 19:30

Preston Freelancer Meet-Up: July
Longer July Banner.jpg.jpg
LBV Hub Networking
31 Jul 2025 - 31 Jul 2025

Preston Freelancer Meet-Up: July

Society1, Coworking Space, Preston, PR1 3LT

10:00 - 11:30

Cumbria Business Expo 2025
https---cdn.evbuc.com-images-880461633-4862066883-1-original.20241022-110415.jpeg.jpg
LBV Hub Exhibitions
19 Sep 2025 - 19 Sep 2025

Cumbria Business Expo 2025

Carlisle Racecourse, Carlisle, CA2 4TS

09:00 - 15:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV122 Online Graphic
Subscribe now

Weekly news bulletin