Shareholders' agreement template
A shareholders' agreement sets out how a private limited company will be run and how its shares can be issued, sold or bought back, alongside the company's articles. It covers the board, the decisions that need shareholder consent, pre-emption on new shares and transfers, drag along and tag along, leavers, restrictions and dividends. It is signed by every shareholder and by the company, and new shareholders join it by signing an adherence agreement.
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Your company's articles must say the same; have both checked before signing.
What changes each time
19 values. Everything else is your wording, kept exactly.
The company and its shareholders
- Company
- Each shareholder and their short name
- Issued shares
- One row per shareholder in Schedule 1
The board
- Maximum directors
- Shareholding to appoint a director
- Meetings
- Quorum
- Chair and casting vote
Shares and exits
- Drag along and tag along
- Leaver provisions
- Bad leaver period
- Vesting
- Permitted transfers
Consents and money
- Borrowing threshold
- Capital expenditure threshold
- Salary threshold
- Dividend policy
- Restriction period
The rules it usually needs
Written in plain English when the template is set up.
- Once for each item
“One row in Schedule 1 for each shareholder, and a party line and signature line for each shareholder beyond the first two.”
The cap table listed three shareholders, so Schedule 1 had three rows and the investor got its own party and signature lines.
- One of several wordings
“Include drag along and tag along, or mark clause 7 "Not used".”
The term sheet set a 75% drag and a 50% tag, so the clause was included with those thresholds.
- One of several wordings
“Leaver provisions with vesting, without vesting, or not used.”
The founders' email asked for good and bad leaver terms with 36-month vesting, so clause 8 used the vesting wording.
- One of several wordings
“Include the deadlock clause only for two equal shareholders, or mark clause 11 "Not used".”
With the investor joining, the company was no longer 50/50, so clause 11 says "Not used" and the later clause numbers stay the same.
- One of several wordings
“A shareholder with enough shares may appoint a director, or the board clause says only how many directors there are.”
The term sheet gave appointment rights at 25%, so clause 3.1 included them.
Questions people ask
Does a company have to have a shareholders' agreement?
No. Every company has articles, but a shareholders' agreement is optional. It is a private contract between the shareholders and the company, and unlike the articles it is not filed at Companies House.
What is the difference between a shareholders' agreement and the articles?
The articles are the company's public rulebook. The agreement adds private terms between the shareholders, and this one says it prevails over the articles between them and that the articles will be brought into line.
What are drag along and tag along?
Drag along lets holders of a set majority make the others sell on the same terms to a genuine buyer. Tag along lets minority shareholders join a sale that would give a buyer control, on the same terms.
What is a good leaver and a bad leaver?
A shareholder who works in the business and leaves must sell their shares. A good leaver gets fair value; a bad leaver, such as someone who resigns early or is dismissed for gross misconduct, gets the lower of what they paid and fair value.
How does a new shareholder join the agreement?
They sign an adherence agreement in the form of Schedule 3, which binds them to the agreement as if they had signed it, without the existing parties signing again.
Use this template
It opens in DocuWeave as a template you can check, change and publish. Nothing is used until you do.