Articles of association
- ✓constitutional document
- ✓public at Companies House
- ✓required for limited companies
- ✓may use model articles
- ✓governs company administration and share mechanics
Shareholders’ agreement checklist
What should be included in a shareholders’ agreement?
A shareholders’ agreement should set private rules for how shareholders make decisions, transfer shares, deal with exits, resolve disputes and protect the company if relationships break down.
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Quick answer
What should a shareholders’ agreement cover?
At a practical level, the agreement should create clear private rules for ownership, decision-making, share transfers, exits, leavers, valuation, confidentiality and disputes.
✓parties and company details
✓shareholdings and ownership structure
✓board/director appointment rights
✓reserved matters
✓voting thresholds
✓share transfers and pre-emption rights
✓permitted transfers
✓good leaver / bad leaver provisions
✓valuation and buyout mechanics
✓drag-along and tag-along rights
✓deadlock
✓dividend policy
✓future funding
✓confidentiality
✓restrictive covenants, where appropriate
✓intellectual property and business opportunities
✓dispute resolution
✓relationship with articles of association
Not every clause is suitable for every company. The agreement should match the ownership structure, shareholder roles and commercial risks.
Articles vs private contract
Does a shareholders’ agreement replace the articles?
No. Articles and shareholders’ agreements are separate documents. Articles are the company’s constitutional rules, while a shareholders’ agreement is a private contract between shareholders and often the company.
Every limited company must have articles of association, and many small companies use model articles unless they are changed. A shareholders’ agreement does not replace those articles. The two should be consistent where they overlap, and some share transfer or rights provisions may need to be reflected in the articles as well as the agreement. If they conflict, advice may be needed.
Shareholders’ agreement
- ✓private contract
- ✓can contain confidential commercial terms
- ✓regulates shareholder relationships
- ✓covers exits, transfers, deadlock, reserved matters and disputes
- ✓should work alongside the articles
Clause checklist
Essential shareholders’ agreement clauses
The right clauses depend on the company’s ownership, risk and commercial arrangement. Use this checklist to identify the provisions that may need to be covered or tailored.
A
Parties and company details
Identify the shareholders who are bound, the company, registered details and whether the company is also a party. New shareholders should usually become bound through a deed of adherence or equivalent joining mechanism.
B
Shareholdings
Record ownership percentages, share classes where relevant, ordinary share assumptions, voting rights and any agreed capitalisation position. Where different share classes or investor rights are involved, the wording should be checked carefully.
C
Director and board appointment rights
Explain whether certain shareholders can appoint or remove directors, nominate observers, receive board information or participate in management decisions. Keep director rights separate from shareholder ownership rights.
D
Reserved matters
List decisions that need special shareholder consent before the company acts, such as issuing shares, borrowing, selling major assets, changing the business, taking on investors, hiring senior staff or winding up.
E
Voting thresholds
Set ordinary/simple majority rules, enhanced consent thresholds and any unanimous consent requirements. Vetoes should be practical: too many veto rights can create deadlock.
F
Share transfers
Control when shares can be sold or transferred and to whom. Private companies usually restrict transfers so unwanted third parties do not become shareholders without an agreed process.
G
Pre-emption rights
Give existing shareholders a first-refusal process before shares are transferred or, where relevant, before new shares are issued. Transfer and issue pre-emption rights should be aligned with the articles where they overlap.
H
Permitted transfers
Allow specific transfers, such as to family members, family trusts or group companies, only where suitable for the company. The permitted-transfer wording should say what happens if the permitted relationship ends.
I
Good leaver / bad leaver
Explain what happens if a shareholder leaves the business, breaches obligations, stops working, dies, becomes incapacitated or is dismissed. Leaver provisions can be sensitive and may need legal and tax advice.
J
Valuation mechanism
Set how shares are valued on a compulsory transfer or buyout, including fair value, market value, discounts, accountant or expert determination and payment timing. Vague valuation wording is a common dispute trigger.
K
Drag-along rights
A drag-along clause may allow an agreed majority to require minority shareholders to join a sale if the threshold and process are met. The mechanics should be precise and consistent with the articles.
L
Tag-along rights
A tag-along clause may allow minority shareholders to join a majority sale on the same terms, helping them avoid being left behind with a new controlling shareholder.
M
Deadlock
Set escalation steps if key shareholders cannot agree, especially in a 50:50 company. Options can include senior discussion, mediation, expert determination, a carefully designed buy-sell process or winding-up as a last resort.
N
Dividends and funding
Explain whether profits are normally distributed or reinvested, who decides dividend policy and whether shareholders may be expected to make loans, capital contributions or support future funding rounds.
O
Confidentiality
Protect business information such as pricing, clients, suppliers, know-how, financial information, product plans, strategy and board or shareholder discussions during and after share ownership.
P
Restrictive covenants
Non-compete, non-solicit and non-dealing restrictions may be relevant for founder or active shareholders, but they should be carefully tailored to the legitimate interests, role, duration and scope of the business.
Q
Intellectual property and business opportunities
Clarify ownership and use of IP, inventions, code, content, trade marks, domain names and know-how, and restrict shareholders from diverting opportunities that properly belong to the company.
R
Dispute resolution
Set an escalation path, mediation, expert determination for technical issues and, where suitable, arbitration or court proceedings. The goal is to create a practical route before disputes damage the company.
S
Termination and new shareholders
Say when the agreement ends, what survives termination and how incoming shareholders become bound. Confidentiality, restrictive covenants and dispute clauses may need to continue after exit.
T
Relationship with articles
Explain that the agreement does not replace the articles. The agreement should be consistent with the articles where they overlap, and certain transfer or rights provisions may also need to be reflected in the articles.
Often missed
Clauses small companies often forget
Many shareholder disputes are not about obscure legal points. They come from missing practical mechanics for exits, deadlock, valuation and who can force or join a sale.
Check: deadlock process for 50:50 companies
Check: what happens if a founder leaves
Check: valuation method
Check: rights for minority shareholders
Check: whether a majority can force a sale
Check: whether a minority can join a sale
Check: who can appoint directors
Check: whether shareholders must offer shares before selling
Check: what happens on death, incapacity or insolvency
Check: confidentiality after exit
Check: whether new shareholders must sign a deed of adherence
Check: alignment with articles
Tailoring
What should be tailored?
Shareholders’ agreements should not be one-size-fits-all. The commercial risk in a 50:50 founder company is different from a family company, investor-backed company or silent-shareholder arrangement.
50:50 founder company
Prioritise deadlock, reserved matters, decision escalation, founder exits and valuation. Equal ownership can be commercially fair, but it needs a route if both sides disagree.
Majority/minority shareholder company
Focus on minority information and consent rights, drag-along and tag-along mechanics, transfer controls and decisions that should not be made by a simple majority alone.
Family business
Consider permitted transfers, death or incapacity, dividend expectations, family employment, succession and rules that prevent private family disputes becoming company disputes.
Investor-backed company
Investor consent rights, funding, share classes, information rights, anti-dilution, leaver provisions and tax-sensitive transfers may need bespoke legal and accounting advice.
Employee shareholder arrangement
Separate employment terms from shareholder rights. Leaver provisions, restrictive covenants, tax treatment, EMI/options and compulsory transfer mechanics should be handled carefully.
Company with silent shareholder
Clarify voting, information access, reserved matters, dividends, transfer rights and whether the silent shareholder has any management or board appointment rights.
Company with valuable IP or client relationships
Prioritise IP ownership, confidentiality, non-solicitation, non-dealing, business opportunities, consultant agreements and NDAs where sensitive information is shared externally.
Take advice for complex share structures, investor rounds, tax-sensitive transfers, EMI/options, regulated businesses, high-value disputes or detailed leaver and valuation mechanics.
Documents
Which Bracton document should you use?
Start with the shareholders’ agreement for shareholder rules, then use supporting documents where the same person also shares confidential information, works in the business or provides separate services.
Primary document
Shareholders Agreement
Use this as the main private contract for ownership, decisions, exits, transfers, leavers, confidentiality, drag/tag rights and disputes between shareholders.
Create a shareholders’ agreement →Supporting document
Non-Disclosure Agreement
Use an NDA where founders, shareholders, investors, consultants or third parties are sharing sensitive commercial information before or alongside shareholder terms.
View NDA →Supporting document
Employment Contract
Use an employment contract where a shareholder also works in the business as an employee or director with employment-style duties, pay and workplace obligations.
View employment contract →Supporting document
Freelance Agreement
Use a freelance agreement where a shareholder or consultant provides separate independent services and the relationship is genuinely self-employed.
View freelance agreement →Risk checks
Common shareholders’ agreement mistakes
A weak agreement often fails because it ignores the practical moments when shareholder relationships break down: exits, transfers, valuation, confidentiality and deadlock.
Avoid: relying only on model articles
Avoid: copying clauses from another company
Avoid: failing to deal with deadlock
Avoid: vague leaver wording
Avoid: no valuation method
Avoid: overbroad restrictive covenants
Avoid: forgetting tag-along/drag-along mechanics
Avoid: failing to bind new shareholders
Avoid: not aligning with the articles
Avoid: waiting until a dispute has started
Avoid: ignoring tax/accounting implications
Next steps
Related Bracton guides and documents
Continue with the related Bracton pages that help you decide whether you need a shareholders’ agreement, compare it with founder terms, or support the wider business legal setup.
Shareholders’ Agreement vs Articles of Association
Compare the mandatory public articles with the private shareholders’ agreement, and see why the two documents should work together.
What Happens if a Shareholder Wants to Leave a Company?
Apply the leaver, valuation, transfer and dispute clauses to the practical problem of a shareholder exit.
Good Leaver vs Bad Leaver Clauses Explained
Go deeper on leaver categories, compulsory transfers, valuation, bad leaver discounts and disputed founder exits.
50/50 Shareholder Deadlock UK
Understand what to check when equal shareholders or directors cannot agree, and why deadlock mechanisms should be agreed before a dispute starts.
Do I Need a Shareholders’ Agreement?
Check when a private shareholder contract is useful for founders, investors, family companies and small businesses.
Founder Agreement vs Shareholders’ Agreement
Compare early founder terms with the shareholders’ agreement usually needed once a company has issued shares.
Small Business Legal Toolkit
A wider legal checklist for contracts, employees, freelancers, confidentiality, IP, debt recovery and company ownership.
Business documents
Browse confirmed Bracton business document routes for shareholder, confidentiality and commercial risk documents.
All legal guides
Find related Bracton guides by legal area, including business, freelance and employment topics.
FAQ
Frequently asked questions
A shareholders’ agreement should usually cover the parties, company details, shareholdings, decision-making, reserved matters, voting thresholds, director rights, share transfers, pre-emption rights, leavers, valuation, drag-along and tag-along rights, deadlock, dividends, funding, confidentiality, restrictive covenants where appropriate, IP, disputes and the relationship with the articles.
Ready when you are
Create clear shareholder rules before there is a dispute
Bracton helps small businesses create shareholders’ agreements covering ownership, decisions, exits, transfers, leavers, confidentiality and disputes.