Advice For Business

Shareholders’ & Partnership Agreements

Whether you are a director or a shareholder in a limited company or a partner in a partnership or limited liability partnership, it is crucial for the smooth running of the business that your rights and obligations are set out clearly in an agreement.

Shareholders' Agreements

It is important that shareholders in a limited company set out their rights and obligations in shareholders' agreements. Shareholders' agreements should be tailored for the specific needs of the particular shareholders and the company concerned.

What do shareholders' agreements contain?

Well-drafted shareholders' agreements will:

  • set out in clear terms the rights, duties and responsibilities of the shareholders as between themselves and as between themselves and the company;
  • involve (in most cases) the preparation of bespoke articles of association. It is crucial that the shareholders' agreements and the articles of association dovetail, because inconsistencies between the two can lead to unwanted consequences;
  • reduce the likelihood of shareholder disputes;
  • when a dispute does arise, provide for a method (or methods) of resolving the dispute, whether that involves the appointment of an expert or more draconian methods such as so called “Russian Roulette” or “Texas Shootout” mechanisms; and
  • often contain appropriate restrictive covenants to prevent shareholders from becoming involved in competing businesses.

What's involved in preparing shareholders' agreements?

Our team of corporate solicitors will:

  • advise on various types of shareholders' agreements, including 50:50 shareholders' agreements and those where there are majority and minority shareholders;
  • tailor shareholders' agreements to the specific needs of the shareholders and the company concerned; and
  • advise existing shareholders on the extent of their duties and obligations under such documents when exiting a company.

Partnership and limited liability members’ agreements

It is important for partners in a traditional partnership or a limited liability partnership (LLP) to put in place a partnership agreement. We advise on traditional partnership agreements and also LLP members' agreements.

As with shareholders' agreements, a partnership agreement provides a reference point for the partners/members involved. Its terms reduce the likelihood of disputes arising and offers methods of resolving a dispute – if one occurs – as well as reduce the costs of handling that dispute.

What does a partnership or LLP members' agreement contain?

Amongst other things, the partnership agreement/LLP members' agreement deals with:

  • how profits are shared;
  • how new members/partners are admitted to the partnership/LLP;
  • management and decision making;
  • retirement and expulsion; and
  • the entitlement and obligations of outgoing partners/members.

What's involved in preparing a partnership or LLP members' agreement?

At the outset, it is important for us to focus on understanding what the partners/members expect of the relationship – both short and long term. We take the partners/members through a series of issues to ensure that the resulting partnership agreement or LLP members' agreement reflects the requirements of the partnership and allows the partnership/LLP to operate as intended.

Disputes arising between Shareholders and Partners

If a dispute has arisen between shareholders and partners, you need specialist legal advice before the situation gets worse.

Our dispute resolution team can advise you on your rights and the potential relief available to you. To discuss your situation and obtain more information, contact Chris Burke.


For further information on shareholders' and partnership agreements, please contact Keith Kennedy on 0161 684 6942 or make an enquiry.