Shareholders Agreement – Multiple Shareholders

What is a Shareholders Agreement (Multiple Shareholders) and when should you use it?

If you are setting up a limited company with others one of the many things you should consider is a Shareholder Agreement.

A Shareholders Agreement governs the relationship between the shareholders of a company and the company itself.

It regulates matters not covered by a company’s constitution and is therefore supplementary to these documents.

It is one of your company’s most important documents.

This Shareholders Agreement is our full standard version, suitable for most private limited companies regardless of the industry of the business.

It is best suited for use where there are multiple shareholders i.e. more than two.

Some companies may wish to create different classes of shares as a means of giving different rights to different shareholders (for example, they want some shares to be non-voting).

This template allows for Ordinary voting shares only but could be adapted for various classes if required.

It could be put in place by a majority or a minority shareholder when the company is formed, or at any later time, for example, on change of ownership or when a significant debt investment is made or repaid.

You should use this Shareholders Agreement if:

• You would like to lay down the rules between the shareholders of your company
• You want to detail your rights, obligations and liabilities; and
• You want to protect your interests
• You want to detail what happens if one of the shareholders dies or leaves for any reason

If you’re looking for a simpler shareholders agreement to protect minority shareholders you should check out our minority shareholders agreement template

If you’re looking for an agreement where there are two equal shareholders of 50:50 then our shareholders agreement 50:50 shareholdings is best for you.

You can read our guide to shareholders agreements here

Why have a formal agreement?

Shareholders agreements are used because even the smallest business has to operate under the same company rules as much larger ones.

In many instances a small limited company is often more like a partnership than a quoted company.

Using a shareholders’ agreement allows the best of both worlds.

The company can be run as if there were a partnership with the advantages of limited liability and any other reasons behind forming a company in this way in the first place.

What is normally in the agreement?

• Who is to work in the company and on what basis – all the shareholders will usually be entitled to be directors?
• A list of matters which cannot change unless all the shareholders agree
• An agreement to insure shareholders lives so that if they die the others have a fund to buy their shares
• How to retire in a way that gives the others a chance of buying the retiring shareholders shares

Once you’ve got a signed subscription and shareholder agreement in place, then, when you’re bringing on board further shareholders (provided that you’re doing so on the same terms) they will not need to sign the shareholder agreement itself.

Instead, they can simply sign a deed of adherence to it, which is a simpler document but that binds them, and you, to the same terms as the original shareholder agreement.

You can use our deed of adherence for these purposes.

There is one already attached to this template agreement at Schedule 4.

It is important that when drafting your shareholders agreement you also consider it in conjunction with a director’s service agreement or contract of employment.

This gives both the company and the shareholders further safeguards.

You can find our director’s service agreement here