When you start a business with someone else, everything feels exciting, until you hit your first disagreement.
That’s where a shareholder agreement comes in.
It’s not about expecting conflict. It’s about building clarity, trust, and protection from day one.
Here’s what it means, what it covers, and why every multi-founder business should have one.
What a shareholder agreement actually is
A shareholder agreement is a private, written contract between a company’s shareholders.
It sets out how the business will be run, who owns what, and what happens if things change, like if someone wants to leave or sell their shares.
Think of it as the rulebook for how you work together, created before problems ever arise.
Why it matters
When you first start a company with co-founders, it’s easy to assume you’ll always agree.
But even great partnerships can hit tough moments, and that’s normal.
A shareholder agreement helps you:
- Avoid misunderstandings by setting clear expectations
- Protect your shares and voting rights
- Prevent disputes by outlining fair processes
- Attract investors who want to see your ownership structure is well managed
It’s not just paperwork, it’s peace of mind.
What it usually includes
Every agreement looks a little different, but most cover the same key points:
- Who owns what – how many shares each person holds
- Voting rights – who gets to make key decisions
- Dividends – how profits are shared
- Share transfers – what happens if someone leaves or wants to sell
- Decision-making – how disagreements are handled
- Exit clauses – what happens if the business is sold or wound down
If you’re a single-founder company, you don’t need one right away.
But as soon as someone else owns part of your business (even a small percentage) it’s smart to have an agreement in place.
When to create one
The best time to agree on terms is early, ideally soon after incorporation.
Once the company is registered, everyone knows how shares are split and how decisions will be made.
Waiting until later often means trying to fix problems after they’ve already started, and that’s always harder.
Do you need a lawyer to write one?
It depends on how complex your company is.
You can find simple templates online, but a lawyer can tailor an agreement to your specific situation, especially if there are multiple investors or founders.
Foundrs can’t draft legal documents for you, but we can help you stay organised and point you toward trusted partners who specialise in shareholder agreements.
What happens if you don’t have one
Without a shareholder agreement, your company is governed only by its Articles of Association, the default rules filed at Companies House.
Those cover the basics but don’t protect you if something personal or unexpected happens, like:
- A co-founder leaving suddenly
- Disagreements over profit shares
- Someone wanting to sell to an outside investor
Having your own agreement gives you flexibility and control, instead of relying on default rules written for every company.
How Foundrs fits in
Foundrs helps you get the foundations right.
When you set up your limited company with us, we guide you through adding shareholders, defining ownership, and keeping your documents safe in your dashboard.
When it’s time to create a formal shareholder agreement, we’ll point you to verified legal partners who can help you draft one properly, so your company stays compliant, fair, and future-ready.
In Summary
A shareholder agreement protects relationships as much as it protects shares.
It’s a simple way to make sure everyone knows where they stand, now and in the future.
It doesn’t have to be complicated or expensive; it just needs to exist.
Foundrs helps you lay the groundwork for strong partnerships, from setting up your company to keeping everything organised as you grow.
FAQs:
What is a shareholder agreement?
A shareholder agreement is a written contract between a company’s shareholders. It outlines who owns what, how decisions are made, and what happens if someone leaves or sells their shares. It helps prevent disputes and keeps things fair for everyone involved.
Do I need a shareholder agreement if I’m the only owner?
If you’re the only shareholder, you don’t need one right away. But if you ever bring in a co-founder, investor, or partner, it’s smart to create one early to protect everyone’s rights and clarify responsibilities.
When should a shareholder agreement be created?
Ideally, as soon as the company is incorporated, before any issues arise. Setting terms early ensures everyone knows how decisions will be made and what happens if someone wants to leave or sell their shares.
Why is a shareholder agreement important?
It prevents misunderstandings and helps protect relationships between co-founders and investors. It sets clear rules around ownership, profit-sharing, and decision-making, so you’re not left guessing when something changes.
What should a shareholder agreement include?
It should cover ownership (who holds what shares), voting rights, how profits are shared, what happens if someone leaves, and how big decisions are made. It’s the rulebook for how you’ll work together as shareholders.
Can I write a shareholder agreement myself?
You can use a simple template for a small company, but it’s best to get legal advice for more complex setups. Foundrs can connect you with trusted partners who specialise in shareholder agreements.
What happens if we don’t have a shareholder agreement?
Without one, your company relies only on its default Articles of Association. Those cover the basics but don’t protect you if personal or financial disagreements arise between shareholders.
Is a shareholder agreement legally binding?
Yes, once it’s signed by all shareholders, it becomes a legally binding contract. It’s separate from your Articles of Association and gives you more flexibility in how your business is managed.
Can we change a shareholder agreement later?
Yes. As your company grows, you can update or amend the agreement if everyone agrees. It’s a living document, designed to evolve as your business and shareholder structure change.
How does Foundrs help with shareholder agreements?
Foundrs helps you set up your company correctly, record shareholder details, and store your documents safely in your dashboard. When you’re ready to create a formal agreement, we’ll point you to verified legal partners who can draft one properly.
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