A shareholder’s agreement is a constitutional document governing the running of a Company. 

It will include provisions relating to director’s decision making, make up of the board, policies on dividends, shareholder rights on exit, the transfer of shares, and restrictive covenants.

The advantage of a Shareholders Agreement is that it is a private contractual document between the shareholders, whereas a company’s Articles of Association are a public document listed at Companies House.  Any agreements between shareholders which are of a sensitive nature should therefore be included in a Shareholders Agreement.

Shareholders Agreements provide clarity in relation to the expectations of the shareholders and are useful in avoiding a lengthy and costly dispute should shareholders decide to part ways.