Shareholders’ Agreements

Setting the rules between shareholders before disagreements arise.

A shareholders’ agreement governs how a company is run, how decisions are made and what happens when a shareholder wants to leave, dies or falls out with the others. Together with the company’s Memorandum of Incorporation (MOI), it is the foundation of a stable business.

Key clauses

  • Board and management: who appoints directors and how the business is managed.
  • Reserved matters: important decisions that need shareholder approval.
  • Transfer of shares: pre-emptive rights, drag-along and tag-along rights.
  • Deadlock: what happens when shareholders cannot agree.
  • Exit and leaver provisions: including good and bad leaver terms and valuation.

Agreement and MOI must align

Under the Companies Act, a shareholders’ agreement must be consistent with the Companies Act and the company’s MOI. Any inconsistent provision is void to the extent of the inconsistency, so the two documents must be prepared together.

Prevention is cheaper than litigation

Shareholder disputes are expensive and disruptive. Clear dispute resolution, deadlock and exit mechanisms can save a business.

When you need one

A shareholders’ agreement is important when:

  • Two or more founders start a company together.
  • An investor takes up shares.
  • A key employee becomes a shareholder.
  • Family members hold shares in a family business.
  • An existing agreement is outdated or no longer reflects reality.
  • Shareholders are in dispute and need a way forward.

How we prepare your agreement

Four steps to an agreement that works.

  1. Consultation
    We understand the business, the shareholders’ roles and what each party wants to protect.
  2. Term sheet
    We agree the key commercial terms, such as control, funding, exit and valuation.
  3. Drafting
    We prepare the shareholders’ agreement and, where needed, amend the MOI to match.
  4. Signing and implementation
    We finalise the documents, update the securities register and file any MOI amendment with CIPC.

We also act in shareholder disputes, including deadlock, oppression claims and buy-outs, where an agreement is silent or not followed.

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What to prepare

Information for drafting your agreement.

  • The company’s MOI and registration documents.
  • The current shareholding and securities register.
  • Details of each shareholder’s role and contribution.
  • Any existing agreements or investor term sheets.
  • Your goals on control, funding and exit.

Common Questions

No, but without one, shareholders rely only on the Companies Act and the MOI, which may not address issues such as exits, deadlock and valuation.
The MOI prevails. Any provision in the shareholders’ agreement that is inconsistent with the MOI is void to that extent.
A drag-along right lets majority shareholders require minority shareholders to sell on the same terms to a buyer. A tag-along right lets minority shareholders join a sale by the majority on the same terms.
The agreement can provide for the remaining shareholders to buy the shares, often funded by a buy-and-sell agreement and life cover.
Yes. Amendments usually require the agreement of all parties, or the majority specified in the agreement.

NEED A SHAREHOLDERS’ AGREEMENT?

We prepare clear, practical shareholders’ agreements and MOIs that protect your interests and reduce the risk of disputes.

Read more: What should be covered in my shareholders’ agreement? · Buy-and-sell agreements

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This page is general information and not legal advice.

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