Shareholders' Agreement for a Private Company Limited by Shares (LTD)

What is a shareholder agreement?

A shareholder agreement is an agreement between the shareholders of a company that sets out the rights, responsibilities and obligations of each shareholder in the company. The shareholder agreement also addresses how the company will be run and governed, as well as the powers of the shareholders.

What is the difference between a shareholders' agreement and the articles of association?

A shareholders agreement is an agreement between the shareholders of the company which sets out their rights, responsibilities and other matters not covered by the articles of association. The shareholder agreement permits the clauses to be more specific or tailored to the shareholders' interests.

The articles of association is not a contract between the shareholders, but a public document that outlines the internal rules governing the running of the company. Whereas the shareholder agreement is private to the shareholders, the articles of association can be accessed by the public as it has to be filed with the Companies House.

What is the difference between a shareholder agreement and a partnership agreement?

The difference between a shareholder agreement and a partnership agreement has to do with the differences in the structures of the businesses.

A shareholder agreement is specifically for companies and outlines how the relationship between the shareholders and the directors will be managed. In contrast, a partnership agreement is specifically for a general partnership, and there are no provisions for managing the relationships between the partners and any directors.

Is it mandatory to have a shareholder agreement?

No, it is not mandatory to have a shareholder agreement, as it is not a legal obligation. However, it is recommended to have one in place for the sake of clarity.

What does Private Company Limited by Shares mean?

A Private Company Limited by Shares is a type of corporate entity whose shareholders' liability (e.g., for debts and other obligations) is limited to the amount of money they invested in the business for an ownership stake. "Shares" refers to the portion of the company the person owns. It is a private company because the shares for ownership in the business are not offered to the general public, and the company does not trade on the stock market.

Who can enter into a shareholders' agreement?

A shareholder can either be a natural person, another company, a general partnership, an LLP or any other kind of entity (e.g. an unincorporated association).

Where the shareholder is a natural person, there is no minimum age requirement to be a shareholder, except where there is a restriction in the company's articles of association.

What can be the duration of a shareholder agreement?

The duration of the shareholder agreement will usually be connected with the life of the company. However, the shareholders are free to define a duration for the shareholder agreement if they so wish.

What has to be done once a shareholder agreement is ready?

Each party should be given a copy of the document so that they can read it. If each party is happy with the agreement it should then signed by each, with such signature being witnessed by an independent person.

Is it necessary to register a shareholder agreement?

No, it is not necessary to register a shareholder agreement, as it is not one of the required documents to be made available to the public on the companies register.

Is it necessary to have witnesses for a shareholder agreement?

The shareholder agreement should be witnessed by people who qualify as valid witnesses. This means that a witness must be 18 years old and not related to any of the shareholders signing the agreement.

What must a shareholder agreement contain?

A shareholder agreement must contain:

• The details of each shareholder;
• The details of share ownership;
• The voting rights of the shareholders;
• How shares can be transferred;
• The powers of the shareholders; and
• Termination of the agreement.

Which laws are applicable to a shareholder agreement?

Companies Act 2006

Help from a lawyer

You can choose to consult a lawyer if you need help.

The lawyer can answer your questions or help you through the process. You will be offered this option when you complete the document.

How to modify the template?

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.