Do I really need a shareholders agreement?
If you're going into business with a friend, family member, or business associate, it’s natural to focus on the exciting opportunities ahead. But here’s the question every business with more than one owner should be asking:
“Do we need a shareholders agreement?”
At McMillans, we’ve seen too many promising ventures run into trouble because this essential step was skipped. So, our advice is simple: yes, you absolutely need one—and ideally before any issues arise.
What is a shareholders agreement?
A shareholders agreement is a legal document that outlines the rights, responsibilities, and expectations of each shareholder in a company. It works alongside the company’s constitution—but goes further by addressing real-world scenarios that the constitution doesn’t typically cover.
Why isn’t the company constitution enough?
While your company’s constitution sets the groundwork for how the business operates, it often doesn’t account for specific shareholder relationships or what happens when things go wrong.
Consider questions like:
What if a shareholder wants to exit the business?
Can someone be a shareholder without working in the business?
How are key decisions made—and by whom?
What if there’s a disagreement?
Who gets a seat on the board?
Can a shareholder be removed?
Without a shareholders agreement, there are no clear rules to answer these critical questions—which is when misunderstandings turn into disputes.
Why it matters more than you think
Most businesses start with optimism. But even in the best relationships, challenges arise. And it’s during tough times that having a solid agreement makes all the difference.
We’ve seen situations where businesses have been:
Stalled by decision-making deadlocks
Undermined by shareholder exits without a buyout plan
Caught in costly and emotional legal battles
All of which could have been prevented with a clear, mutually agreed shareholders agreement prepared while everyone was on the same page.
Real talk: without an agreement, where does the value go?
It’s a painful truth: without clear terms, value is often lost to legal fees and fractured relationships. That’s why we encourage business owners to act early.
How McMillans can help
We guide clients through the key discussions every shareholders agreement should cover. We’ll help you:
Identify areas of potential risk
Facilitate productive discussions between partners
Liaise with your solicitor to ensure the agreement reflects your intentions
Integrate the agreement with your broader tax and business strategy
Protect your business—and your partnership
A shareholders agreement may not be the first thing you think about when launching a venture, but it’s one of the smartest things you can do to protect your investment, your relationships, and your peace of mind.