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Shareholders’ agreement aims to regulate the relationship between the shareholders of a company, and between the shareholders and the company.

Shareholders adopt shareholders’ agreements to give them some certainty around how the company will be managed and how particular situations will be dealt with. You are NOT required to have a shareholders’ agreement in law because your company’s constitution (if one is adopted by the company) and the Companies Act 2016 will provide a default set of rules to govern the shareholder’s rights.

The reason people adopt a shareholders’ agreement is that they would prefer to have a set of rules that have been developed specifically with their situation in mind. These rules often deal with matters that are not covered by the company’s constitution or by the Companies Act or other law, or deal with them in a way that is different from the usual position. In fact, every company with more than one shareholder is encouraged to have one shareholders’ agreement in place.