Company and investment
Shareholders' agreement
The agreement between the people who own a company, sitting alongside its constitutional documents. It covers who decides what, which decisions need more than a simple majority, what information shareholders receive and how often, and the rules for shares changing hands — pre-emption, tag-along, drag-along, and what happens when somebody dies or leaves. It is usually signed at an investment, and much of it exists to protect minority holders from being ignored and majority holders from being blocked.
- In the catalogue
- Company and investment
- Where it can live
- Any of the 184 governing laws
Who uses one
- Companies with more than one owner, whether investors or founders.
- Startups closing an investment round.
- Family and small businesses with several shareholders and no written rules.
What you are deciding
- Who sits on the board, and who may appoint them
- Which decisions need consent beyond a simple majority
- What information shareholders get, and how often
- How shares may be transferred, and who gets first refusal
- Tag-along and drag-along on a sale
- What happens on death, incapacity or departure
- How the company is funded in future, and what happens to those who do not follow
- How deadlock and disputes are handled
Blanks you leave stay blank and wait in the room. Nothing is filled in from a guess.
The sections a draft usually has
- 1The parties and the company
- 2Board composition
- 3Reserved matters
- 4Information rights
- 5Share transfers and pre-emption
- 6Tag-along and drag-along
- 7Leaver and death provisions
- 8Future funding
- 9Deadlock and disputes
- 10Confidentiality and governing law
A general outline, not a required one. What turns up in a draft follows what you described. A contract is written in the order a contract is read.
What people call it
The names this kind of paper goes by. They are here because people search for them. They also filter the catalogue. They are not a wordlist the door matches. At the composer you describe the deal in your own words instead.
- shareholders agreement
- stockholders agreement
- investment agreement
- shareholder rights agreement
- sha
- members agreement
Questions people ask
- How does this fit with a company's constitution?
- The constitutional documents are public and bind the company; the shareholders' agreement is private and binds the people who sign it. Where they conflict, which wins depends on the legal system and on the drafting.
- What are reserved matters?
- Decisions the company cannot take without specified consent — new shares, borrowing, selling the business, changing what it does. They are the practical centre of most shareholders' agreements.
- What do tag-along and drag-along mean?
- Tag-along lets a minority join a sale on the same terms; drag-along lets a majority require a minority to sell. They usually appear together and are heavily negotiated.
General answers about the document. Not advice about your situation. Not written about any one country.
Where it lives
A contract names the legal system it is governed by. That is a separate decision from which paper it is. You pick it at the door, from any of the 184 units in Governing law, including England and Wales, Delaware, California and New York.
You do not start from this page. Describe the deal in one sentence at the door. Read the draft back in plain language, in the order a contract is read.
Start it at the door →Related kinds