A shareholder agreement is a legally enforceable agreement between shareholders and the company. It sets out the rights and obligations of the shareholders and helps avoid expensive and potentially damaging disputes in the future.

New and existing businesses should draw up a shareholder agreement to regulate the way the business is run and the relationship between the shareholders. At Birch Law we have considerable experience assisting businesses with the preparation and amendment of shareholder agreements to suit their specific requirements.

If you would like to discuss any of our services with us, feel free to contact us using the form below or give us a call at 0161 669 4621 for a free no obligation chat. We look forward to assisting you with your legal concerns.



If you would like any further information or need advice about any dispute, please get in touch with us today. You can contact us today on 0161 669 4621 or by email on for a free no obligation chat.

A shareholder agreement is an agreement between all or some of the shareholders in a company and is created with the purpose of protecting both the business and its shareholders. It can be especially beneficial to minority shareholders who usually have limited control over the operation of the business.

For shareholders it outlines what their rights and obligations are; how their shares can be distributed and sold; what happens if a shareholder wants to leave; and what happens in the event of a dispute. For the business it sets out how the company will operate and how significant decisions will be made.

It is advisable to draft a shareholder agreement when starting a new company or issuing shares to new shareholders. It also helps the founders or any investors understand what is expected of them and what they can expect to receive from the business. Existing businesses should also keep their shareholder agreements under review to ensure that they are up to date with all relevant commercial and legal matters.

Shareholder agreements vary from business to business. They are very fact specific and should be tailored to suit the requirements and aspects of that business.

Much depends on the nature of the business; the class of shares; and many other factors but there are certain basic components that every shareholder agreement should contain. Examples would include the number of shares to be issued and how shareholders can sell or transfer their shares to third parties. A shareholder agreement should also cover matters such as dividend payments; distribution of earnings; the frequency of board meetings and the appointment or resignation of directors.

The agreement should provide sufficient safeguards for certain events, such as if a shareholder is made bankrupt or dies, and a good shareholder agreement will also provide for instances where a shareholder resigns or sells their shares in the company. In such cases the agreement should include restrictive covenants and provisions for good leavers and bad leavers. Restrictive covenants would prevent a shareholder from competing with the company for a specified period in the future. Whilst good leaver/ bad leaver provisions would limit the value of a departing shareholder’s shares in certain circumstances.

The shareholder agreement and the company’s articles of association will normally dictate the best way to resolve a dispute. You should obtain legal advice as early as possible to help minimize the impact of the dispute and ensure that you are aware of your rights and options. Where possible, it is advisable to try and resolve the dispute by negotiation or some agreed form of alternative dispute resolution (ADR). Our specialist dispute resolution solicitors can guide you through the process, working with you to find the right solution for you and your business. We can assist with:

  • Unfair prejudice petitions.
  • Derivative claims.
  • Just and equitable winding up proceedings.

Much like any other contract, a shareholder’s agreement is legally binding. Therefore, in most cases the standard rules of contract law will apply regarding enforceability and the remedies available if a breach of that agreement or a dispute occurs.

Ultimately a shareholder’s agreement is a legally enforceable contract so where there is a failure of the obligations within a shareholder’s agreement, the wronged party can claim for breach of contract, enforcing the terms of the agreement.

If you are concerned about the actions of a director or another shareholder or worried your rights are being disregarded, there are several actions you can take. The nature of the dispute or the impact of the breach will be unique to each case, but typically consequences would include:

  • Termination of the shareholders’ agreement or termination of employment.
  • The innocent party could seek damages for loss suffered because of the breach.
  • The court may order specific performance of the contract or of the provision breached.
  • The innocent party may seek an injunction to prevent a threatened breach.
  • Court ordered injunction requiring the offending shareholder to take an action such as transferring their shares.

At Birch Law our expert team of commercial solicitors have considerable experience dealing with shareholder agreements. We can prepare shareholder agreements for new and existing businesses. We can advise shareholders and businesses on the legal implications of existing shareholder agreements. We work with you and your business to make sure that your shareholder agreement is tailored to your specific requirements and provides you with as much protection as possible.

For a free non obligation chat please feel free to contact us today on 0161 669 4621 or by email on

Whichever funding route you choose, you can rest assure that our experienced solicitors will always do their utmost to keep costs as low as possible. If you would like to discuss any of our services with us, feel free to contact us using the form below or give us a call at 0161 669 4621 for a free no obligation chat.




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