Shareholders Agreement (for 3 Parties or More)

This solicitor-approved Shareholders Agreement template is a business contract to be used by three or more individuals who are shareholders in a limited company or are forming a limited company.

When to use this shareholders agreement template

This Shareholders Agreement form can be used when you are forming a new limited company, or the limited company is already set up. 

This Shareholders Agreement download provides alternative wording for each situation.

The Shareholders Agreement form is intended for use by the shareholders in a private limited company and sets out the basis upon which they will conduct the business of the company.

Although a company's memorandum and articles of association contain rules for conduct of business, a shareholders agreement can be tailored to the particular requirements of the shareholders. It is also a confidential document, whereas the memorandum and articles of association are available to the public at the Companies Registry.

Contents of this shareholders agreement form

This Shareholders Agreement download, in Word format, outlines the rules for managing the limited company and includes:

• The issuing of capital
• The policy regarding profits made by the business
• The conduct of the limited company
• Meetings and voting rights of the directors and shareholders of the limited company
• The opening of bank accounts
• The appointment of auditors, if needed
• Share transfers
• What happens if there is a dispute or deadlock among the shareholders

For further details of the clauses included in this agreement, see the ‘Contents’ tab above.

Drafted by solicitors for straightforward completion, this agreement includes guidance on how to fill the contract template in.

Shareholders agreement download note

This shareholders agreement form is supplied by ContractStore.com.

Other shareholders agreement templates

• Agreement for 2 Parties

Other information

• Why limited companies need this agreement

External links

• Wikipedia

Clauses in this Shareholders Agreement download

1. Name & capital

This clause sets out the number of shares which each shareholder owns or will subscribe for (i.e. purchase), depending on whether the company is already in existence or to be formed. This clause:

• sets out the basic principles concerning capital requirements upon which the shareholders agree to run the company;
• makes it clear that they intend to contribute any extra capital by way of loans rather than further shares;
• provides that, to the extent that this is achievable, working capital can be funded by way of an overdraft from the bank rather than out of the shareholders' pockets. 

2. Profits policy

This clause sets out the intention of the shareholders to run the business for profit and to distribute as profits by way of dividend.

3. Directors, chairman and secretary

Depending on the arrangements between the shareholders, all or only some of them may be appointed as directors and this clause identifies the names of the directors and the name of the first chairman, who will be one of those directors. 

Under UK law, a company can have only one director but it is usual to have more than one. There is usually a company secretary (although this is no longer compulsory under the Companies Act 2006). Sometimes a firm of accountants will provide this service. Alternatively, the company secretary may also be a director.

This clause also deals with the question as to whether a director can appoint someone else to attend a board meeting on their behalf. 

4. Meetings

This clause sets out the procedure for meetings of the board, the quorum (i.e. the number of directors who must be present in order for the meeting to take place), frequency of meetings, and the usual place at which board meetings will be held. This clause:

• Gives each director one vote at a meeting and deals with the question as to whether, if there is a split vote, the chairman has an extra or casting vote. 
• Deals with voting at board meetings. In this agreement, unless otherwise agreed, a majority of the directors present at the meeting will have the power to pass the board resolutions. 
• Allows for resolutions to be passed without a meeting and requires the minutes to be prepared and circulated for approval. 

5. Conduct of the business of the company

This clause:

• Establishes where the head office will be.
• Contemplates that an individual will be appointed to run the company on a day to day basis. That individual is likely to be a director but not necessarily.
• Sets out in general terms the authority of the managing director or general manager. 

6. Bank accounts

This clause specifies the name of the bank at which the company will open an account and the authority of directors to sign cheques, etc.

7. Auditors and accounting information

This clause outlines:

• The name of accountants or auditors, if they are being used.
• Contains a requirement for proper accounting records and monthly management accounts.
• Specifies the Accounting Reference Date – i.e. the date to which the annual accounts will be prepared. 
• Makes it clear that the shareholders have access to the company's books.

8. Matters requiring the consent of all shareholders

This clause affects board meetings as well as meetings of the shareholders and sets out those key decisions which requires the consent of all the shareholders. 

9. Shares

This clause is designed to avoid the risk of any shareholder trying to dispose of their shares without the agreement of the others or using the shares as security; for example, to secure a loan which might give lenders certain rights over those shares.

10. Exercise of voting rights

In this clause the shareholders agree to act in good faith so as to underpin the obligations imposed on all of them under the terms of this agreement. 

11. Non-competition, restrictions and confidentiality

Depending on the nature of the business, the shareholders may wish to protect the company from one of the shareholders entering into competition with the company. There is a direct restriction on this risk in this clause. Also included is a general confidentiality obligation.

This clause imposes specific restrictions on a departing shareholder.

12. Transfers of shares

This clause contains a fairly detailed procedure to deal with the situation where a shareholder wants to leave the company and dispose of their shares. The objective is to give all the other shareholders an opportunity to buy the shares of the departing shareholder  as well as the right to block that sale. This clause:

• Requires such a shareholder to give notice to all the others of the intended disposal.
• Gives the other shareholders an option to buy the transferring shareholder's shares at a fair value. This is either the price which is agreed between the transferor and the other shareholders or a price which is fixed by the auditors of the company.
• Deals with some procedural issues including the requirement for a transferor to resign from any directorship or other appointment they have with the company. 
• Deals with the situation where not all the other shareholders want to acquire the shares of the transferor. 
• Includes a technical provision designed to ensure that the procedure goes through even if one of the shareholders fails to sign necessary papers by giving a power of attorney to the other shareholders. 
• Deals with the death of a shareholder and gives the others an option to take up the shares of the deceased. The time limit is extended to deal with the arrangements with regard to obtaining a grant of probate, etc. 

13. Default

This clause allows a shareholder to be expelled if they commit material breach of their obligations or becomes insolvent.  

14. Deadlock procedure

A "deadlock" clause is not always incorporated in this type of agreement, but it can be useful if there is a serious dispute between shareholders as to how the company should be run. It contains a procedure whereby a decision considered to be of major importance to the business by one or more shareholders does not get approved by the board or by the shareholders.

The dispute can, if agreed, be referred to mediation but where the deadlock prevents the company from continuing its business, a shareholder can serve a notice on the others either requiring them to sell their shares to him/her or to acquire his/her shares at a fair value and if neither option is accepted, the company has to be wound up. 

15. Notices

This is a formal clause dealing with notices served by one shareholder on others under the terms of this agreement.

16. Miscellaneous

This clause contains a number of "boiler plate" provisions which are useful from a technical legal point of view.

No shareholder can assign their interest in the agreement to a third party.

17. Governing law and resolution of disputes

There is a three stage dispute resolution process. If a dispute arises, first there should be direct negotiation between the parties in dispute, there is then an option for mediation of the dispute and, finally, the matter is to be referred to the courts.