Published 6 August 2026 · updated 9 September 2026 · 6 min read
Model articles govern how a company runs. They say almost nothing about what happens when the people who own it fall out, and that is the situation a shareholders' agreement exists for.
It is private
Unlike the articles, a shareholders' agreement is not filed at Companies House. Nobody outside the company reads it. That is frequently the point — it can deal with money and personalities in terms you would not want published.
What it typically deals with
- Leavers. What happens to shares when a founder resigns, is dismissed, dies or becomes ill. Without this, someone who left in year two still owns a quarter of the business in year ten.
- Deadlock. Two shareholders with 50% each and no mechanism is the most predictable disaster in small company law.
- Drag-along and tag-along. Whether a majority can force a minority into a sale, and whether a minority can insist on joining one.
- Decisions needing consent. Which things — borrowing, issuing shares, hiring at a certain level, changing the business — need more than a simple majority.
- Dividend policy. Whether profits get distributed or reinvested, and who decides.
- Restrictive covenants. What a departing shareholder may not do: compete, poach staff, take clients.
- Roles and commitment. Who is expected to work in the business, how much, and what happens if they stop.
When to write it
At the start, while everyone is still friendly and nobody knows who will end up wanting what. Negotiating a leaver clause when someone is already leaving is negotiating with a known answer.
Does a sole shareholder need one?
No. With one shareholder there is nobody to agree with. Write one when a second shareholder arrives, and make it a condition of them arriving.
How it interacts with the articles
The two need to be consistent. Where they conflict, sorting out which prevails is exactly the argument you were trying to avoid. This is a job for a solicitor, and it is one of the few points in setting up a company where paying for advice is unambiguously cheaper than not.
Nothing here is advice about your situation
It is general information about how UK company registration works, written to be accurate at the time of publication. Rules and fees change. Where a decision matters — tax, structure, an insolvent company — take advice on your own facts.