Harper James is a UK full-service commercial law firm advising ambitious start-ups, scale-ups and established companies on the laws of England and Wales. A shareholder agreement sets the rules for ownership, decision-making and relationships between shareholders, so its terms should be reviewed whenever the business raises funding, issues shares, changes directors or prepares for an exit.
Check that the agreement matches the latest cap table, share classes and articles of association. The articles bind the company and its members, while a shareholder agreement is generally a private contract between its parties. Conflicting provisions can create uncertainty, particularly around transfers, voting rights and director appointments. Confirm who is signing, whether all shareholders are included and whether the company itself is a party where its obligations require that.
Identify the matters requiring ordinary approval, special resolution or specific shareholder consent. Reserved matters often cover issuing shares, taking significant borrowing, acquiring or selling assets, changing the business, approving budgets and entering related-party transactions. Review quorum and notice requirements, information rights and board appointment provisions alongside the practical needs of the business. A useful shareholder agreement review resource can support a clause-by-clause checklist before legal drafting or negotiation begins.
Transfer restrictions should explain when a shareholder can sell, who receives a right of first offer or first refusal, and how price and completion are determined. Check permitted transfers to family members, trusts or group companies, as well as provisions for death, insolvency and loss of employment. Tag-along rights protect minority shareholders on a sale, while drag-along rights can allow a required majority to deliver a full-company exit. Leaver provisions also need careful review, especially the distinction between good leavers and bad leavers and the valuation applied to their shares.
The agreement should address pre-emption on new share issues, shareholder loans, future funding rounds and employee share incentives, including how existing ownership may be diluted. Deadlock provisions should provide a workable escalation process, such as negotiation, mediation or a defined buy-sell mechanism. Finally, check amendment thresholds, confidentiality, governing law and whether the agreement reflects current commercial arrangements. Review it after each investment round, material ownership change or proposed sale, rather than relying on a document prepared for an earlier stage of the business.