Do I Need a Shareholders’ Agreement?

December 2, 2021


By Siobhan Williams

As a start-up you will be looking to minimise expenditure and maximise funds. However, investing in a few key legal areas, such as regulating the relationship between the founders is of paramount importance.

No one goes into a business with the intention of falling out with their co-founders or other investors but unfortunately business disputes, whether that be with your founding business partners, friends or family members that have invested in your start-up, are all too common and can be extremely acrimonious. 

You may disagree on important business decisions, one of you may want to take your money out and move on to a new venture, or maybe the business has not been as successful as envisaged and you are trying to find a way of getting your money back. 

Why a shareholders’ agreement? 

Not only can these disputes lead to expensive legal action, they are also highly disruptive to the ongoing business.

A shareholders’ agreement will allow you to minimise that risk as it helps you address key issues at an early stage and will act to regulate the relationship between your fellow shareholders as the business grows. 

In addition to regulating day to day management issues, a shareholders’ agreement can be used to address more fundamental points such as, what do you and your fellow shareholders want out of the business or out of your investment? You are likely to have different priorities, both personal and business, and therefore need to make sure that you are all heading in the same direction by identifying and agreeing on how you will manage respective exit strategies should the need arise.

A shareholders’ agreement will help you to address the following issues:

  • Should there be any obligations or restrictions on what each shareholder can and cannot do, both whilst they are a shareholder and afterwards?

  • Should dividends be paid or the profits reinvested? If they are to be paid, should each shareholder be entitled to the same amount?

  • What entitlement does each shareholder have to any new shares that are issued?

  • What happens if one of you wants to sell your shares or otherwise transfer your shares to a third party?   

  • Should all shareholders be entitled to be appointed as a director or do you only gain that right on having a set percentage of shares?

  • What happens in the event of a disagreement – how will the dispute be resolved if you end up in a dead-lock?

Discussing, agreeing upon and recording these decisions at the outset, in the form of a shareholders’ agreement, should minimise the risk of a fall out further down the line. If the worst should happen and a fall-out is inevitable, the agreement acts as a code for how the disagreement should be dealt with so that the matter can be resolved as swiftly and cost effectively as possible, allowing everyone to move on and business to continue with minimal disruption.

If you would like more information about the above or a related matter, get in touch with Siobhan Williams on, or call on 029 2082 9124 for a free, no obligation conversation.



Contact Our Team
Catherine Burke
View Profile
Damian Phillips
View Profile
Fflur Jones
Managing Partner
View Profile
Gareth Wedge
View Profile
Mark Rostron
View Profile
Nick O’Sullivan
View Profile
Owen John
View Profile
Rhodri Lewis
View Profile
Stephen Thompson
View Profile

I have worked with Darwin Gray for a number of years and the level of service, professionalism and timely response is second to none. I would highly recommend Darwin Gray to any business.”

Becs Beslee
Dice FM Ltd

Darwin Gray have provided us with a first-class service for many years now. They really take the time to understand our business and develop relationships which results in advice and support that is contextualised and effective.”

Rebecca Cooper
ACT Training

We have worked with Darwin Gray for several years and have always found their services and advice to be first class.”

Karen Gale
Stepping Stones Group

An extremely professional and sincere company who make time for your queries and understand the need to break down certain facts and information to ensure everything is understood perfectly. I would highly recommend the company to anyone looking for any type of legal advice”

Gwawr Booth
Portal Training Ltd

PSS has worked with Darwin Gray for many years. We have always received an excellent service. Prompt and professional advice and support.”

Ledia Shabani
Property Support Services UK Ltd

We have used several departments within DG recently and we have been very pleased with an effective, efficient and down to earth service. Very happy thus far and I expect that we will continue to use DG.”

Guto Bebb
Farmers’ Union of Wales

Darwin Gray offer us truly superb services. Very professional, quick and services available bilingually which is very important to us, highly recommend.”

Iwan Hywel
Mentrau Iaith Cymru

My “go to” in urgent and time sensitive cases for direction, support and advice. The team are quick to respond to calls or emails for advice and support on all matters. Always explain complex matters in a way a lay person can easily understand.”

Margot Adams
Guarding UK Ltd