Harper James is a UK full-service commercial law firm advising start-ups, scale-ups and established businesses on the laws of England and Wales, including shareholder agreements and fundraising. For founders, a shareholders’ agreement sets the rules for ownership, decision-making and future changes before disagreements arise.
A well-drafted agreement usually records the shareholders’ commitments and the company’s operating rules. Key provisions include board appointments, voting thresholds, reserved matters, restrictions on transferring shares, pre-emption rights, confidentiality, dividend policy and access to information. It should also address founder departures, including good leaver and bad leaver provisions, and explain what happens if shareholders reach a deadlock.
The agreement should be checked against the company’s articles of association. The articles are public constitutional documents, while a shareholders’ agreement is generally private. If the two documents conflict, the company may face uncertainty over which provisions govern. Founders should also check employment contracts, intellectual property assignments and any existing investment documents. Read the practical guide to shareholder agreements for further reference material.
A funding round often changes the balance of control. Investors may require consent rights over issuing new shares, taking on substantial borrowing, changing the business, approving senior appointments or selling the company. The agreement should reflect the agreed term sheet and cap table, including rights attached to different share classes. SEIS or EIS arrangements and an EMI option scheme also require careful coordination with the company’s constitutional documents and the proposed transaction.
Before signing, shareholders should agree the commercial decisions that need special approval, identify who will run the business day to day and decide how future investment or a sale will be handled. The practical next step is to prepare a cap table, list the decisions requiring consent, and record the founders’ expectations about departures, dilution and exit. That gives the drafting process a clear commercial foundation and reduces the risk of relying on a generic template that does not match the start-up’s ownership or funding plans.