Why the Articles Are Not Enough

1.1Your seat

You are a junior at Greaves Street LLP in Bristol. The firm acts for Aldous & Wren Limited — "A&W" — which holds 35.00% of Thornbury Cold Chain Limited. Nadia Ferreira, the associate, supervises you. Across the table is Pellow & Hart LLP of London, for Ferris Logistics plc, the 55.00%. Anya Molloy, a sole practitioner, acts for Dr Imogen Sayer, the 10.00%. The document on your desk is the Shareholders' Agreement dated 30 April 2026 — "the SHA" from here on.

The Company is Thornbury Cold Chain Limited, a private company limited by shares, incorporated in England and Wales on 2 March 2026. The Business is temperature-controlled warehousing and last-mile distribution for food and pharmaceutical customers across the South West of England and South Wales. Trading began on 1 May 2026, the day after Completion.

The Company is a joint venture: one company, owned by parties who each put something different in and each expect a say in return. It is not a partnership; clause 22.1 says so. A partner owes duties to its partners. A shareholder owes none to the others unless it signs a contract that says otherwise. The SHA is that contract.

1.2The three owners

Three parties own the Company. A fourth signs with them — the Company itself, so that it can do what the document asks of it.

Read the third column against the fourth. Ferris paid £1.00 a share in cash. A&W's stores went in under the Business Transfer Agreement at an agreed value of £3,500,000, satisfied by 3,500,000 B Shares — £1.00 a share again. Dr Sayer paid the nominal value of £0.01 a share: £10,000 for one tenth of the Company. Her price was her agreement to run the Business and to assign it her routing software. That is why her C Shares carry terms the others do not.

Each owner wanted something different from the document, and each had a point.

Ferris was paying £5,500,000 in cash for a majority. A majority owner should run the company it has paid for: a board that reflects 55.00%, decisions by majority, the Articles and the Companies Act 2006 doing the rest. Ferris answers to shareholders of its own, and a company with two masters stalls. A minority veto over the budget is a veto over the business.

A&W was putting in its whole business — two cold stores and three generations of trade — for 35.00% of a company it would not control. Without protection, Ferris could run the Company as a subsidiary and outvote A&W on everything. A&W wanted that protection signed and enforceable against Ferris before a single pallet moved. Protection first; then the stores.

Dr Sayer was giving up a consultancy and her software for 10.00% at nominal value. She could never outvote anyone. She wanted two narrower things. Her tenth must not be diluted away or taken from her cheaply. And on a sale she must be paid the same per share as the others.

1.3What the Articles do, and what 55% buys

Every English company has articles of association — "the Articles". They are its constitution: adopted by the members, filed at Companies House and open to anyone who asks. They bind the Company and its members, but only as members. They say what a shareholder may do with its shares and votes, not what it must do with its money.

Members decide by resolution, and the general law sets two thresholds. An ordinary resolution passes with more than half of the votes cast. A special resolution needs at least 75%. Changing the Articles takes a special resolution. Removing a director takes only an ordinary one: section 168 of the Companies Act 2006 gives the members that power, and the Articles cannot take it away.

Now run the register through those thresholds. Ferris holds 55.00%, so it passes any ordinary resolution alone. It can appoint and remove every director. It cannot pass a special resolution alone. A&W holds 35.00%, so it cannot pass anything alone. It can block a special resolution, because Ferris and Dr Sayer together hold 65.00%, short of 75%. Dr Sayer holds 10.00% and blocks nothing: Ferris and A&W together hold 90.00% and can change the Articles over her head.

Ferris's opening position was to leave it there. The SHA moved it. Ferris kept what a majority fairly expects: the Chair, two A Directors, and 55.00% of every vote at a general meeting. A&W got what it would not sign without. Two B Directors. A Board that cannot meet unless one of them is present (clause 4.5). A Chair with no casting vote (clause 4.6). And a written B Consent required for each of the 14 Reserved Matters in Schedule 2 (clause 5). Dr Sayer got a seat on the Board as Managing Director and no consent right. What the SHA gives her, the Act does not: a variation that adversely affects her rights as C Shareholder needs her written consent (clause 22.3). The shares are 55, 35 and 10. The say is not.

1.4Four things the Articles cannot do

Why not put A&W's protection into the Articles and stop there? Because four things an SHA does, the Articles cannot.

It is private. The Articles are on the public file; a competitor, a customer or a bank can read them tomorrow. The SHA is filed nowhere. Nobody outside the four parties sees the Reserved Matters, the £1,800,000 of Shareholder Loans or the terms on which the Manager can be made to sell.

It is contractual. The Articles regulate membership: shares, votes, meetings, transfers. They cannot oblige Ferris to lend the Company £1,100,000 and A&W £700,000 (clause 7.2). They cannot oblige Ferris and A&W to vote for a dividend of not less than 50% of distributable profits once the Board recommends it (clause 9.2). They cannot stop Dr Sayer competing with the Business for 12 months after she leaves (clause 17.1). A contract can, and the SHA does.

It is confidential. Privacy is a fact about filing; confidentiality is a promise. Clause 18 binds each Shareholder to keep the terms of the SHA, and what it learns about the Company, to itself and its advisers. A director appointed by A&W may report to A&W (clause 18.3), which is then bound too.

It is enforceable between the Shareholders. This is the one that matters most to a 35% holder. Under the Articles alone, a minority whose co-owner misbehaves is largely left to the Act. Its remedy is a petition under section 994 that the Company's affairs are being run in a way unfairly prejudicial to it — slow, expensive and uncertain. Under the SHA, if Ferris votes against what it promised, A&W sues Ferris for an injunction or damages, on a contract Ferris signed.

There is a second reason the protection sits with the Shareholders, not their directors. Every director owes duties to the Company: section 172 of the Act requires each to promote its success for the members as a whole. A B Director cannot simply take A&W's orders. So the SHA puts A&W's vetoes into A&W's own hands, as holder of the B Shares. B Consent is given by the Shareholder, in writing, and may be withheld in its own interest (clause 22.1). Clause 5.1 says it outright: a resolution of the Board does not dispense with either consent.

"As between the Shareholders" is the limit as well as the point. The SHA prevails among the four parties who signed it. It does not rewrite the Articles for the world, and clause 21.3 leaves every power the Act confers on the Company intact. Where the Company cannot lawfully bind itself, the Shareholders promise to procure the result instead. Each does so with its own votes as a member, and through the directors it appointed only so far as it lawfully can (clause 21.2). That qualification is the section 172 point again: a director's duty to the Company comes first, and the Shareholder's promise stops where that duty begins.

That limit is why Schedule 6 exists. The Company and its directors act on the Articles, not on promises among Shareholders. So the mechanics the Company itself must operate appear in both documents: the three classes (article 3), the quorum (article 8), transfers subject to the SHA (article 12), drag-along and tag-along (article 14), the Chair with no casting vote (article 16). Article 12 is the working example. It tells the directors to refuse to register a transfer not made in accordance with the SHA. A transfer that breaks the Shareholders' promise also fails at the register.

1.5Completion: three documents, one switch

The deal was agreed in heads of terms on 14 October 2025: a short paper recording 55.00%, 35.00% and 10.00%, and that Dr Sayer would manage. The heads were subject to contract: a label that says neither side intends to be bound until the formal documents are signed. Until 30 April 2026, A&W had a deal and no rights.

At Completion on 30 April 2026 three documents were signed together: the SHA; the Business Transfer Agreement, by which A&W sold its two cold stores into the Company; and Dr Sayer's service agreement. Only the SHA is reproduced here. Clause 2.1 ties the three together.

The last sentence is the switch, and both sides wanted it. A&W would not transfer its stores into a company whose SHA was unsigned. Ferris would not pay £5,500,000 into a company with no stores and no Manager. Dr Sayer would not assign her software without her shares. Making the three documents conditional on each other means nobody moves first. Clause 22.2 then closes the door: the SHA, the Articles and the other two documents are the entire agreement, and the heads of terms fall away.

1.6The map, and what the document will do to each owner

Twenty-two clauses and six schedules, in four groups. Clauses 1 to 3 say who owns what. Clauses 4 to 9 say how the Company is run and paid for. Clauses 10 to 17 say how anyone gets out, from a Lock-in Period ending 30 April 2029 to the Manager's leaver terms. Clauses 18 to 22 are the document's hygiene. Schedule 2 lists the vetoes; Schedule 4 defines Fair Value — a price per Share fixed by an independent accountant valuing the whole Company, with no discount for a minority holding; Schedule 6 reprints the key Articles.

To Ferris the SHA will do this. It gives Ferris the Chair and two of five directors, appointed and removed by Ferris alone. Then it takes away the casting vote, so 55.00% of the register is not 55.00% of the Board. It makes 14 decisions impossible without A&W's written consent. It commits Ferris to lend £1,100,000 of the £1,800,000 facility. It locks Ferris in until 30 April 2029. And it stops Ferris selling the whole Company alone: drag-along needs holders of not less than 75% of the Shares (clause 13.1), and Ferris holds 55.00%.

To A&W — your client — it will do this. It gives A&W a veto over each Reserved Matter and a Board that cannot sit without a B Director. It commits A&W to lend £700,000. It gives A&W first refusal on Ferris's shares after the Lock-in Period (clause 11). It lets A&W sell alongside Ferris on the same terms if Ferris sells control (clause 14). And it turns a change of control of A&W itself into a deemed offer of all its B Shares to Ferris at Fair Value (clause 12.3). Protection runs both ways.

To Dr Sayer it will do this. It gives her 10.00% of every dividend and every sale, pro rata with the others (clauses 9.3 and 14). It gives her no veto and no funding obligation. It vests her C Shares 25% a year over four anniversaries (clause 16.2). It prices them by how she leaves. A Good Leaver is paid Fair Value for her vested shares; a Bad Leaver the lower of nominal value and Fair Value for all of them (clause 16.5). And it binds her not to compete for 12 months (clause 17.1).

None of this is theory. In 2027 the Board will split over a £2,400,000 expansion, and in 2028 one of the owners will itself change hands; each time, this document decides. It starts with the register. Chapter 2 is the three classes, why they rank equally for money and differ for control, and whether 10.00% for £10,000 was fair.