Shareholder and Partnership Agreements

Protecting your interests through
tailored partnership arrangements

Going into business with other people, whether through a limited company with multiple shareholders or as part of a business partnership, can be a little like entering a marriage. During the initial ‘honeymoon’ phase, everything feels exciting and positive, and it can be hard to imagine disputes arising or the relationship breaking down.

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Sadly, just like marriages, business partnerships can and do fail. To prevent matters from becoming costly and damaging, it is essential to have a shareholders’ agreement or partnership agreement in place before launching the venture.

Shareholders’ Agreements

If your business takes the form of a company with more than one owner, then you will need a shareholders’ agreement. This agreement sets out the rights and responsibilities of each shareholder and helps protect the long-term stability of the company.

A well-drafted shareholders’ agreement will typically include:

The amount of equity held by each shareholder
Voting rights and decision-making processes
How profits will be shared
Risk allocation
Any restrictive covenants agreed between the shareholders
An exit strategy if a shareholder wishes to leave the business
A dispute resolution procedure
Intellectual property rights

Partnership Agreements

A partnership agreement is required when two or more people go into business together without forming a limited company. The terms of a partnership agreement are similar to those of a shareholders’ agreement, but specifically tailored to partnerships.

A comprehensive partnership agreement will usually cover:

The name of the partnership and details of the partners
Retirement or withdrawal of partners
How much equity each partner holds in the business
Profit and risk allocation
Dispute resolution procedures
Intellectual property rights
Restrictive covenants
How business duties and responsibilities will be divided between partners

Why Are Shareholder and Partnership Agreements Important?

Without a formal agreement in place, disputes can quickly escalate, leading to uncertainty and even business failure. A legally binding agreement ensures clarity, sets expectations, and provides a framework for resolving disagreements fairly and efficiently.

Contact Us to Draft Your Agreement

At Bennett Oakley, we have many years of experience negotiating and drafting both shareholders’ agreements and partnership agreements. Our expert solicitors will take the time to understand your business goals and provide tailored advice to protect your interests.

Speak with a Bennett Oakley expert today

Looking for legal support? Get in touch with our solicitors, and we’ll connect you with the right expertise to meet your specific needs through our trusted legal team and professional partners.

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FAQ Topics

What is the purpose of a shareholders’ agreement?

A shareholders’ agreement sets out the rights and responsibilities of each shareholder in a company. It helps prevent disputes by providing clarity on issues such as profit sharing, decision-making, exit strategies, and dispute resolution procedures.

Do I need a partnership agreement if I trust my business partner?

Yes, even if you have complete trust in your business partner, circumstances can change. A partnership agreement ensures that expectations are clear from the start and provides a framework for resolving disagreements, protecting both the partners and the business.

What happens if I don’t have a shareholders’ or partnership agreement?

Without a formal agreement, disputes may be harder to resolve and could lead to costly litigation or even the breakdown of the business. A properly drafted agreement offers legal certainty and helps protect your investment.

Can a shareholders’ or partnership agreement be changed later?

Yes, agreements can be updated if circumstances change, such as when new partners or shareholders join the business, or if the business grows. It is advisable to review and update agreements regularly to ensure they remain relevant.

What is typically included in a partnership agreement?

A partnership agreement usually covers partner names, profit and loss allocation, equity shares, retirement or withdrawal of partners, restrictive covenants, intellectual property rights, and how responsibilities are divided within the business.