Why Shareholders’ Agreements Matter

We have seen a lot of changes in business ownership over the last 18 months. Some of this was driven by tax changes, with owners accelerating sales to avoid higher liabilities. Other changes have been prompted by rising costs and the effort required to stand still, leading some owners to retire or sell, while others have progressed to board level as businesses expand. Regardless of the reason, there are steps business owners can take to ensure any change has a strong starting point.

The Importance of a Shareholders’ Agreement

A shareholders’ agreement is a vital document for companies with more than one shareholder. While it becomes particularly important when change occurs, it should also be in place to manage day-to-day matters. It typically covers areas such as shareholders selling or retiring, disagreements, incapacity, unanimous decision-making and restrictions on who shares can be sold to. The best time to put an agreement in place is when the company is formed, or when someone becomes a shareholder, so expectations are clear in advance. It will also address what happens when a shareholder leaves, including valuation, notice periods and situations where one shareholder wants to sell but another does not. Without prior agreement, these discussions can quickly become difficult and impact business performance. If an agreement is already in place, it is worth reviewing it when things are going well, particularly around notice periods and non-competition clauses, both of which are receiving increased scrutiny. Taking time to put the right agreements in place — or reviewing existing ones — can help avoid uncertainty, protect relationships, and ensure the business remains stable when change occurs.

Our Takeaways

Business ownership change is increasingly common, and having clear agreements in place can make a significant difference. A well-structured shareholders’ agreement helps set expectations, manage risk and protect relationships — not just during periods of change, but as part of the business’s ongoing stability and long-term success.

How We Can Help

We work closely with business owners to put robust shareholders’ agreements in place or review existing arrangements, helping ensure they remain aligned with your business, your people, and your future.