Arrangements between owners.
WHAT IT IS
A private agreement between shareholders, separate from the constitution.
WHY IT EXISTS
It addresses matters the constitution does not, and it is private.
WHAT IT TYPICALLY COVERS
What decisions require unanimous or special consent How shares may be transferred What happens if a shareholder dies or leaves How the business is funded How disputes and deadlock are resolved Restrictions on competing How profits are distributed Information rights
WHY DEADLOCK PROVISIONS MATTER
Two equal shareholders who disagree can paralyse a company entirely.
WHAT MECHANISMS EXIST
A casting vote Referral to a third party A mechanism requiring one to buy the other out
WHY THAT LAST ONE WORKS
It forces resolution rather than permitting stalemate.
WHAT TO ADDRESS ABOUT DEPARTURE
Whether a leaving shareholder must sell At what price Whether the price differs depending on circumstances
WHY CIRCUMSTANCES MATTER
A shareholder leaving amicably and one removed for misconduct are different situations.
WHAT TO ADDRESS ABOUT FUNDING
Whether shareholders must contribute further What happens if one cannot
WHAT TO ADDRESS ABOUT WORKING IN THE BUSINESS
Whether shareholders are expected to, and what happens if they stop.
WHY
Shareholders who stop working but retain full ownership create resentment.
WHEN TO PUT IT IN PLACE
At the start, while relations are good.
WHY
It cannot be agreed once there is a dispute.
WHAT TO HAVE
It drafted by a solicitor.
