I am a shareholder but have never entered into a shareholder’s agreement. How is my relationship with the other shareholders governed?

A shareholder agreement governs how shareholders work together, but there is no legal requirement to have one.

A shareholder agreement usually clarifies the rights and obligations of shareholders, the issuing and selling of shares, employment aspects and how to deal with disputes and conflicts. 

Any shareholder is generally in a poorer position without a well-drafted shareholder agreement.

If there is no shareholder agreement, the void is filled by relying on the company’s articles of association and the Companies Act 2006. The lack of an agreement can significantly impact a minority shareholder’s ability to exercise any authority or be involved in decision-making. Still, there remain very significant protections for minority shareholders.

If you have specific concerns regarding the conduct of other shareholders or the company, the lack of a shareholders agreement does not mean you have no recourse. If you have been impacted in an unfair and prejudicial manner by another shareholder, you will likely have recourse — even if you have only a minority shareholding.