Key Clauses in a Shareholders’ Agreement

May 22, 2026 | Business Law Articles

What Are the Key Clauses to Include in a Shareholders’ Agreement?

A shareholders’ agreement supplements a company’s articles of association and regulates ownership, control, and major decision-making.

For UK companies, particularly those with multiple shareholders or investors, these clauses are critical.

Decision-Making and Reserved Matters

Reserved matters ensure important decisions cannot be made by a simple majority alone.

These often include:

● Issuing new shares

● Selling the business or major assets

● Entering significant business contracts

● Borrowing above the agreed limits

● Appointing or removing directors

● Changing the nature of the business

Without reserved matters, a 51% shareholder may effectively control the company.

Share Transfer Restrictions

Pre-emption rights allow existing shareholders to purchase shares before they are sold externally.

Other provisions may include:

● Good leaver / bad leaver clauses

● Compulsory transfer provisions

● Restrictions on transfers to competitors

These clauses protect ownership stability and prevent unwanted third parties from acquiring shares.

Drag-Along and Tag-Along Rights

These clauses regulate exit scenarios:

● Drag-along rights allow majority shareholders to compel minority shareholders to sell in a company sale.

● Tag-along rights protect minority shareholders by allowing them to join a sale.

These are essential for companies seeking investor funding or planning an eventual exit.

Funding and Anti-Dilution Protection

Where future investment is anticipated, agreements should address:

● Pre-emption on new shares

● Anti-dilution protection

● Commitments to participate in funding rounds

This protects shareholders from losing value when additional capital is raised.

Non-Compete and Confidentiality

To protect the business and its commercial contracts, shareholders’ agreements often include:

● Non-compete restrictions

● Non-solicitation clauses

● Confidentiality protections

These must be reasonable in scope and duration to be enforceable under UK law.

There is no one-size-fits-all solution. The right provisions depend on your ownership structure, funding plans, and commercial objectives.

We can help you draft a bespoke shareholders’ agreement aligned with your business strategy.

As always, the team are here to help you. To get in touch just call us on 020 3740 2370 or email info@clearlybusinesslaw.co.uk

The Officers and Members of an English Company

Apr 23, 2026 | Business Law Articles

Understanding the difference between shareholders and directors is fundamental to UK company law and effective corporate governance.

Ownership and management are legally separate.

Shareholders (Members)

Shareholders own the company. They:

• Hold shares
• Receive dividends
• Vote at general meetings
• Approve changes to the articles of association
• Appoint and remove directors

They do not manage day-to-day operations.

Different classes of shares can carry different rights, including voting and dividend entitlements.

For companies limited by shares, shareholders’ rights are often further regulated by a shareholders’ agreement.

Directors

Directors manage the company’s operations and enter into business contracts on its behalf.

They owe statutory duties under the Companies Act 2006 and must:

• Act within their powers
• Promote the success of the company
• Avoid conflicts of interest
• Exercise reasonable care, skill, and diligence

Their authority comes from the articles of association and shareholder appointment.

Company Secretary

Public companies must appoint a company secretary. Private companies are not required to do so.

The secretary ensures compliance, maintains statutory registers, files documents at Companies House, and supports corporate governance.

Non-Statutory Titles

Titles such as CEO, CFO, or Managing Director are internal roles. They are not legal positions under the Companies Act 2006.

Understanding these distinctions helps ensure proper governance and compliance.

If you are setting up a company or reviewing your corporate structure, we can advise on directors’ appointments, articles of association, and shareholder arrangements.

As always, the team are here to help you. To get in touch just call us on 020 3740 2370 or email info@clearlybusinesslaw.co.uk

Directors’ Duties: Understanding Your Legal Responsibilities

Mar 5, 2026 | Business Law Articles

Becoming a director of a UK company carries significant legal responsibilities under the Companies Act 2006.

These duties are owed to the company itself, not individual shareholders.

The Seven Statutory Directors’ Duties

Directors must:

1. Act within their powers

2. Promote the success of the company

3. Exercise independent judgment

4. Exercise reasonable care, skill and diligence

5. Avoid conflicts of interest

6. Not accept benefits from third parties

7. Declare interests in proposed transactions

These duties apply whether the company is small and owner-managed or a larger corporate entity.

Consequences of Breach

A breach can result in:

● Personal liability

● Repayment of profits

● Compensation claims

● Disqualification (up to 15 years)

● Wrongful trading claims if the company becomes insolvent

Directors must therefore understand their legal obligations before accepting appointment.

If you are appointing directors, reviewing governance structures, or require advice on compliance with the Companies Act 2006, we can assist.

As always, the team are here to help you. To get in touch just call us on 020 3740 2370 or email info@clearlybusinesslaw.co.uk

What Is a Shareholders’ Agreement?

Feb 16, 2026 | Business Law Articles

A shareholders’ agreement is a private contract between the shareholders of a UK company that sets out their rights, responsibilities, and how key decisions will be made.

It is not legally required under the Companies Act 2006. However, for most growing businesses, it is one of the most important corporate agreements you can put in place.

Unlike a company’s articles of association, which must be filed at Companies House, a shareholders’ agreement remains private. That means it can include commercially sensitive provisions relating to:

● Control and voting rights

● Profit distribution

● Exit mechanisms

● Protection of intellectual property

● Decision-making on major business contracts

Because it is confidential, it often goes further than the articles of association and deals with the practical realities of running a business with multiple owners.

Why Shareholders’ Agreements Matter

A well-drafted shareholders’ agreement can:

● Protect minority shareholders from being sidelined

● Prevent 50/50 ownership deadlock

● Restrict unwanted share transfers

● Clarify who works in the business and on what terms

● Protect confidential information and intellectual property

● Regulate how profits are distributed

Without one, the default position under company law means that majority shareholders may effectively control most decisions.

If your company relies on key business contracts, investor funding, or valuable intellectual property, having a robust agreement in place is essential.

When Should You Put a Shareholders’ Agreement in Place?

At Company Formation

The best time to agree on terms is at set-up, when relationships are collaborative and aligned.

When Taking on Investors

Angel investors, venture capital firms, and private equity investors will usually require a formal shareholders’ agreement before investing.

Following Ownership Changes

If new shareholders join, a founder exits, or equity stakes change, your agreement should be reviewed and updated.

Getting It Right

A shareholders’ agreement may not be mandatory, but it is a core component of strong corporate governance.

The cost of drafting one is modest compared to the cost of shareholder disputes or litigation.

If you are forming a company, restructuring ownership, or reviewing your corporate agreements, we can advise on drafting a shareholders’ agreement tailored to your business.

As always, the team are here to help you. To get in touch just call us on 020 3740 2370 or email info@clearlybusinesslaw.co.uk

7 Questions to Ask Yourself When You’re Thinking of Selling Your Business

May 24, 2022 | Business Law Articles

Whether you think of your business as your baby or not, the fact remains that in order to have built a successful organisation, you’ll be personally invested and attached to it. Future buyers will look at it very differently, so it’s important to be clear-eyed in preparation for a sale. Consider the following questions:

1 – Is your business in the best shape it can be?

Many business-owners wait too long to sell, resulting in their business losing value. Make sure your business is in the best shape prior to a sale by creating as much value as possible. Do you have a robust P&L? Is your intellectual property protected?

2 – Do you have your documentation in order?

Firstly, make sure you have all your business documentation in order. Any prospective buyer will do their due diligence before a purchase and they’ll want to know you’ve got all the crucial documents to hand, including financial information, patents, corporate governance documents, agreements and contracts.

3 – What will a ‘good’ sale look like for you?

You need to decide what your priorities are from the sale, taking into account how much you want to get for it (and what your minimum price would be), how fast you need to sell, the long term prospects of the business and any other conditions or areas of compromise that you need to take into account.

4 – What kind of buyer will allow you to meet your goals for the sale?

Once you’re clear on exactly what you want and need out of the sale, you can prioritise different types of buyer. A Financial Buyer, who is primarily interested in the financial return of the business might get you the highest possible price, but a Strategic Buyer, who will be more interested in the long term opportunities, may be better placed to take over the running of your business sooner if that’s a priority for you

5 – Have you got all the information to negotiate the best deal?

You will need to assess a potential buyers’ suitability, relevant experience and liquidity. You’ll also need to scrutinise any offers closely to make sure that no onerous terms are slipped in. Remember that the purchase price is only one part of the agreement. You should also consider Payment terms, “Earn out” clauses, Acquisition financing security, Employment contracts, Non-compete agreements, Liability assumption and Equity ownership.

6 – How can you manage relationships with everyone involved in the sale?

It’s clear that a positive relationship with your buyer with help ensure a smooth transition and a successful exit. Equally, you’ll need to give some thought as to how to maintain transparency with your employees and other stakeholders, so that the change-of-hands leaves no one disgruntled.

7 – Who can support you to ensure the best exit?

Ensure that you identify and gather your advisers early so that they are there to support you in the framing of the principles of any deal, as well as negotiating the details. Many businesses choose ongoing legal support through a legal retainer service to ensure advice is available throughout the sale process, not just at the point of completion.

With a well-negotiated, positive agreement, you should be able to realise your company’s value, whilst ensuring you are leaving it in safe hands.

As always, the team are here to help you. To get in touch just call us on 020 3740 2370 or email info@clearlybusinesslaw.co.uk

Setting Up a Business Partnership

Mar 12, 2024 | Business Law Articles

…A Business Partnership is a fairly straightforward way for two or more people to set up a business together. The challenge is that there’s no limited liability, which means that each person in the partnership is liable for all the debts of the business. In other words, if the business fails, you may end up owing a lot of money.

In order to guard against this, some partnerships opt for a limited liability partnership model. Or you could consider setting up a limited company where the liability is limited to the face value of the shares.

Features of a Business Partnership

• Fairly simple to set up
• Partners pay income tax on all profits
• Unlimited liability
• No formal registration requirements (unlike other corporate entities)

What happens if you don’t have a Partnership Agreement?

If a Partnership Agreement is not drawn up, business partners run the risk of being subject to the default provisions of the Partnership Act 1890 which include:

• Partners must share equally in capital and profits (regardless of their initial capital contributions)
• Partners must contribute equally to losses
• Admitting a new partner requires unanimous consent of all the partners
• A partner has no right to retire (giving notice to retire in some instances will have the effect of dissolving the partnership)
• There is no power to expel a partner
• Death of any partner will lead to the partnership automatically dissolving To avoid uncertainty and reduce risk, it’s important to have clear, professionally drafted business contractsin place that reflect how your partnership actually operates.

Why have a Partnership Agreement?

A Partnership Agreement governs the relationship between the partners and provides: (a) certainty for the partners on how the business operates; and (b) options for the Partnership to decide how to resolve any disputes, to prepare for the unexpected and most importantly, provide options where the Partnership Act does not.

A Partnership Agreement should cover:

• How you’ll split profits
• How you’ll make decisions
• What will happen if the partners can’t agree – who will have the casting vote, or how will you resolve the issue
• What role each of you will play in the new business
• What happens if one of the partners leaves or a new one joins?

Your next move?

If you would like a Partnership Agreement drawing up or to discuss your business partnership, please contact our Commercial Team on info@clearlybusinesslaw.co.uk

As always, the team are here to help you. To get in touch just call us on 020 3740 2370 or email info@clearlybusinesslaw.co.uk

3 Reasons Your Company Needs a Shareholders Agreement

Nov 22, 2021 | Business Law Articles | 0 comments

A shareholders’ agreement is a contract between a company’s shareholders in which they formalise their relationship and agree how the company will be run. It sets out the rights and duties of shareholders and will often contain important contractual provisions, which might include clauses requiring shareholder consent on specific decisions, regulating the sale of shares and outlining what should happen in the event of a disagreement. Shareholders’ agreements also form part of a company’s wider governance framework, which is why many businesses manage them alongside ongoing company secretarial services.

Just as no one wants to think about a pre-nup when they’re newly engaged, it might seem pessimistic or unnecessary to worry about a formal agreement between shareholders when you’re in the first flush of growth. But whilst shareholders’ agreements are not mandatory by law, there’s no doubt they can be vital in helping you navigate long and happy business relationships, for the following reasons:

1. Preparation

Although you are unlikely to be thinking about conflict or the end of your business when it’s booming, it’s important to cover all eventualities in the business lifecycle. The best way to ensure certainty at any stage is to enter into a shareholders’ agreement. A dispute resolution provision can outline exactly what the shareholders should do in the event of a disagreement, for example, it can specify that the shareholders must consider mediation or arbitration before commencing litigation, helping to safeguard the future of the business and the relationships of those who govern it.

2. Protection

An agreement can help protect and balance the interests of all shareholders. It might require a greater majority approval on resolutions than standard company law does. It could include the need for shareholder consent for the sale or purchase of shares or a clause stipulating shareholder pre-emption rights if the company issues new shares. It might contain ‘drag along’ and ‘tag along’ provisions, which allow majority shareholders to drag minority shareholders with them if there is an offer for their shares and to allow minority shareholders to tag along with the majority shareholders if they are selling their shares.

3. Power

Although the shareholders technically ‘own’ the company, the directors control its day-to-day management. Shareholders may want to set thresholds on the directors’ power and require some of their decisions to need shareholder approval, such as the appointment and removal of directors.

These are just a few of the main reasons why a Shareholders’ Agreement is important to have in place. Any agreement should be reviewed occasionally to check that it is up to date and still meets the shareholder and company needs, and should be re-executed if shareholders change.

Our team at Clearly Business Law work with startups and growing companies to make sure their business interests are protected. Get in touch with us today to discuss your Shareholders’ Agreement.

Fixed Fee Legal Services – The Way Forward

May 14, 2021 | Business Law Articles | 0 comments

3 Reasons Why

All businesses know how important it is to have access to good legal advice when running their own business. However, people are still put off sourcing a lawyer because of the high costs that come with this professional service. The challenge is that by avoiding legal advice they are potentially endangering their business and limiting their opportunities. According to the Legal Services Board, the total annual losses to small businesses arising from legal problems are estimated at £40bn!

Legal services can be complicated and the total cost for a business often depends on the details of an individual case and the type of service provided, as well as unforeseen developments. The traditional way in which lawyers charge for their services is through an hourly rate. More recently there has been an increase in demand for fixed fee legal services, which allows business owners to be in control of their legal expenses while also ensuring their business is protected. Here are three main benefits of using fixed fee legal services:

1. Certainty

The fixed fee model will provide you with certainty over cost. Knowing what the matter will cost at the outset ensures predictability, allowing for better budgeting and more time and resources to concentrate on your core business priorities.

2. Cost effectiveness

The billing process can have a significant impact on a client’s satisfaction with their legal services. Fixed fee legal services can sometimes be lower than traditionally billed hours, something that is particularly relevant for small businesses and start-ups. In addition, engaging a lawyer on a fixed fee basis means that you won’t face any surprises as to how much you are ultimately charged.

3. Efficiency

Small businesse can be worried about the traditional billable hour model. A fixed rate ensures that delivering a particular service is the sole incentive for the lawyer and high quality of work is at the core of the relationship.

If you’re a newly set up or growing business, we expect you’ll need commercial legal advice, such as drawing up terms and conditions, employment contracts and protecting your intellectual property.

Start-ups and SMEs can be hesitant to instruct lawyers and often attempt to deal with any issues themselves, only going to see a solicitor when they have a problem.

Engaging a lawyer on a fixed fee basis from the outset will help you to prevent any challenges and avoid future risk, allowing you to focus on your business and save costs.

Our team at Clearly Business Law work with startups and growing companies to make sure their business interests are protected.

Get in touch with us to find out more about our fixed fee legal services or our retainer service, providing you with a certain amount of legal advice per month.

4 Must-Have Legal Documents For Startups

Oct 13, 2021 | Business Law Articles | 0 comments

Every business should have a set of legal documents that protects them. It’s not mandatory, but you would be crazy not to strongly consider putting these documents in place.

There are certain documents which will help your company grow and develop, and this article discusses a few of them.

1. Shareholder’s Agreement

A Shareholders Agreement is a contract between the shareholders of a company in which they agree how the company will be run. It sets out the rights and duties of shareholders and will often contain clauses prescribing the need for shareholder consent, regulating the sale of shares in a company and outlining what should happen in the event of decision deadlock.

2. Employment and Contractor Agreements

This agreement between Employer and Employee/Contractor forms the basis of their relationship. As the relationship is formalised in writing, it minimises the risk of uncertainty if in the future there is any disagreement.

3. Privacy Policy

A website privacy policy is a crucial online legal document, which provides data subjects with information on how a company collects and processes personal data through their website. This might include personal data given when a user signs up to a newsletter or purchases a product.

4. Customer/Client Terms and Conditions

The key commercial terms relating to the product or service you are offering should be set down in writing to ensure contractual certainly, confirm that each party understands their rights and obligations, and to avoid future misunderstandings. Think about important terms such as liability and termination.

If you’re a newly set up or growing business, we expect you’ll need commercial legal advice, such as setting up any of the above documents.

We know businesses can be hesitant to instruct lawyers and often attempt to deal with any issues themselves, only going to see a solicitor when they have a problem.

Engaging a lawyer from the outset will help you to prevent any challenges and avoid future risk, allowing you to focus on your business and save costs.

Our team at Clearly Business Law work with growing companies to make sure their business interests are protected.

Get in touch with us to find out more about our legal services or our retainer service, which provides you with a certain amount of legal advice per month.

Calling it Quits – Termination of Contracts

Feb 15, 2021 | Business Law Articles | 0 comments

A commercial contract, in simple terms, is a legal binding agreement between at least two parties and is an essential element of any business. Such contracts are entered into by parties in order to protect their interests and to guarantee that their mutually agreed obligations are enforceable by law.

However, with time, circumstances and business needs change and as a result, one party may seek to absolve any continuing obligations. For instance, one party may not be fulfilling their duties, or the contract may no longer be commercially beneficial. Either way, it is important to carefully consider the legal and commercial consequences of terminating a contract and it’s not quite as simple as walking away…

First Things First…

Upon terminating a contract, whilst all future primary obligations come to an end, secondary obligations continue to arise. An example of this would be having to pay damages for breach of contract. However, secondary obligations are not the only element of the contract that will remain in operation. From the outset of a contract, it is essential to consider any survival clauses that have been put into place, such as confidentiality or non-compete clauses. From the very beginning of the contract, these set out any legal obligations which are to apply if the contract is terminated.

Grounds for Termination

The terminating party must elect to exercise their right to bring the contract to an end. This right either arises either by express terms of the contract or by common law. Common law is the part of English law that is derived from custom and judicial precedent rather than statute.

Contractual Right to Terminate

The contract itself may include a specific provision, for instance where there has been a ‘material breach’ of the contract terms, which give the parties the express right to terminate.

Common Law Right to Terminate

At common law, parties will have the right to terminate the contract on the grounds of a serious breach:

• A term allowing termination on reasonable notice in commercial contracts may (and will only) be implied where it is obvious and necessary to give business efficacy to the contract.
• A right to terminate may arise in common law if the term breached is categorised as a condition – that is, a term of the contract that goes to the root of the contract, If a condition is breached (no matter how small the breach), this gives the other party the right to either terminate the contract and claim damages, or affirm the contract. Affirming the contract means the right to terminate is lost but not the right to claim damages for losses caused by the breach. It is important to act quickly in these cases if you wish to terminate.
• Where a term is not a categorised as a condition but a breach is so serious so as to have the effect of depriving the other party of substantially the whole benefit of the contract, that party can treat the breach as a repudiatory breach and terminate the contract as if it were a breach of a condition.

Other options?

Contractual and common law rights to terminate are not the only methods which allow a contract to be brought to its end. The contract may be terminated by agreement of both of the parties – which is exactly what it says on the tin! Any discussions should be treated with care and early advice and help with negotiation should be sought.

Proceed with Caution

Terminating a contract should not be taken lightly. It can be a very drastic step. If a party gets it wrong and terminates the contract without the right to do so, it may amount to a repudiatory breach. This will give the other party the right to claim for wrongful termination. This means that once the contract has ended, they will be able to sue for damages.

Here’s where Clearly Business Law comes in…

Nobody enters into a commercial relationship assuming that it will fail. In an ideal world, contracts would end when they are supposed to – after both parties have fulfilled their obligations, but this is not always the case. Unfortunately, the business world is complicated, and it is important that your required contract reflects this.

At Clearly Business Law, we help business owners make the right decisions for their business. If you would like to know more about business contracts, or just want to discuss your options, then please get in touch with us today. Email info@clearlybusinesslaw.co.uk, or call : 01980 676875