Why the Articles Are Not Enough

1.1Shareholders' agreements in one paragraph

A shareholders' agreement (SHA) is a private contract between the owners of a company. It sets how they run the company, how they fund it and how any of them can leave. This workbook follows one SHA for a joint venture, a company owned by partners who each put in something different. You are a junior solicitor at Greaves Street LLP in Bristol, and you act for the owner with 35%.

1.2Why three businesses share one company

A joint venture lets each owner bring what it has and gain what it lacks. In this one:

• A listed logistics group brings the cash.
• A family cold-storage business brings two cold stores and the trade run from them.
• A logistics engineer brings her routing software and runs the business.

The price of working together is shared control. So each owner must decide how much say it needs, and get it in writing before it puts anything in.

1.3The deal in this workbook

The company is Thornbury Cold Chain Limited. It stores and delivers chilled goods for food and pharmaceutical customers. Its three owners signed the SHA on 30 April 2026, and the company began trading the next day.

These are the parties and your own team:

Ferris and A&W each paid £100 a share. Dr Sayer paid £1 a share, because her real price was running the business and giving the company her software. Chapter 2 asks whether that was a fair price.

Each owner wanted something different:

• Ferris wanted to run the company it was paying for, with decisions made by majority.
• A&W wanted protection it could enforce against Ferris before its stores went in.
• Dr Sayer wanted her shares safe from dilution, and the same price per share as the others on a sale.

A company with two masters can stall, so Ferris resisted every veto. A&W was putting in its whole business, so it would not sign without one.

1.4What each holding gives without an agreement

Under the Companies Act 2006 and the articles of association (the company's public rulebook), more than half the votes passes an ordinary resolution. That can remove any director (section 168). At least 75% passes a special resolution, which is needed to change the articles.

Do these sums for every client first, because they show what the contract must add.

1.5What the SHA adds for each owner

Ferris keeps what a majority expects: the Chair, two of the five directors and 55% of every vote. A&W gets what it would not sign without:

• Two directors of its own, the B Directors.
• A board that cannot meet unless a B Director is present (clause 4.5).
• A Chair with no casting vote, so a tied vote fails (clause 4.6).
• A veto, the B Consent, over 14 decisions listed in Schedule 2, the Reserved Matters.

Clause 5.1 sets out the veto, and Ferris holds the same one.

The veto belongs to A&W as a shareholder, not to the directors it appoints. A director owes duties to the company and must vote in its interest. A&W may refuse its consent in its own interest (clause 22.1), and no board vote can override that.

Dr Sayer has a seat on the board as managing director, but no veto. She has one protection the Act would not give her. Under clause 22.3, a change to the SHA that harms her rights as C Shareholder needs her written consent.

1.6Four things a contract does that the articles cannot

Why not put A&W's protection in the articles? Because a contract does four things the articles cannot:

• It is private. It is filed nowhere, while anyone can read the articles.
• It makes the owners act. They can promise to lend the company money, or not to compete with it.
• It binds the owners to secrecy. Under clause 18, each owner must keep the agreement and company information secret.
• It is enforceable between the owners. If one owner breaks a promise, another can sue it.

The last one matters most to a minority. Without a contract, its main remedy is a petition to court under section 994 of the Act. It must prove that the company is run in a way unfairly prejudicial to it, which is slow, costly and uncertain. With a contract, A&W can instead ask the court to stop the breach by an injunction, or claim damages for its loss.

If the SHA and the articles conflict, clause 21.1 decides.

The words “as between the Shareholders” set the limit. The SHA wins between the people who signed it, but the articles still bind the company and anyone who has not signed. Chapter 10 deals with a real conflict between the two.

1.7How the three documents took effect together

The owners first agreed the deal in heads of terms, a short paper recording the holdings and who would manage. The heads were subject to contract, so nobody was bound until the final documents were signed.

At Completion the parties signed three documents together: the SHA, the managing director's service agreement and the Business Transfer Agreement. Under the last of these, A&W sold its two cold stores to the company. Clause 2.1 ties the three together.

The last sentence is a switch: if one document is not signed, none of them takes effect. A&W would not move its stores into a company whose SHA was unsigned. Ferris would not pay into a company with no stores and no manager, and Dr Sayer would not hand over her software without her shares. So nobody had to go first.

1.8How the SHA is laid out

The SHA has 22 clauses and six schedules, in four groups. The middle two groups are where a joint venture succeeds or fails: how the owners run the company together, and how any of them gets out.

1.9Your job

Your supervisor's first question is: what did A&W actually get? The answer is a say in the company that its 35% could not win at a vote. Your job is to show where each part of that say sits in the SHA, and to point to a clause for every answer.

• Work out what each holding passes and blocks alone, at more than half and at 75%.
• For each protection the client wants, decide whether it belongs in the SHA or the articles.
• Check which documents complete together, and that each fails if another is not signed.
• Read the heads of terms against the final drafts, line by line.