Shareholder Agreements: Preventing Disputes Before They Start

A company's constitution sets the baseline rules, but it rarely covers the human realities of a business: who runs it, how profits are shared, what happens when a founder wants out, and how deadlock is broken. A shareholders' agreement fills those gaps.

Decision-making and reserved matters

Define which decisions the board can take alone and which require shareholder approval — issuing shares, taking on debt, changing the business, or appointing key personnel. This protects minority investors and keeps majority owners accountable.

Transfer of shares

• Pre-emption rights — existing shareholders get first refusal before shares are sold to outsiders.
• Drag-along — a majority can require minorities to join a sale of the whole company.
• Tag-along — minorities can join a sale on the same terms, protecting their exit.

Leaver provisions and valuation

Agree in advance how shares are valued when someone exits, and distinguish 'good leavers' from 'bad leavers'. Disputes over price are far easier to avoid than to litigate.

Deadlock

In a 50/50 company, a fall-out can paralyse the business. Mechanisms such as escalation, mediation, a casting vote, or a buy-sell ('Russian roulette') clause provide a way forward.

Sign the agreement while everyone still likes each other. That is exactly when the fair deal gets done.

We draft shareholders' agreements for founders, family businesses and joint ventures — tailored to the commercial reality, not a template.