Shareholders' Agreements
Protecting shareholder rights and interests.
A well-drafted shareholders' agreement is essential for protecting the interests of all parties in a company. It governs the relationship between shareholders and sets out their respective rights and obligations.
At Duan & Duan UK LLP, we draft and advise on shareholders' agreements for companies of all sizes, from start-ups to established businesses. We ensure that key issues such as decision-making, dividend policies, transfer restrictions, and exit provisions are addressed clearly and comprehensively.
Our Services
We handle shareholders' agreement drafting and review, shareholder dispute resolution, minority shareholder protection, deadlock provisions, and drag-along and tag-along rights.
Practice lead
Shareholders' agreements and their associated disputes are led by Leon Chua, Partner at Duan & Duan UK LLP. Leon has structured and negotiated shareholders' agreements for UK–China joint ventures across multiple sectors (including deadlock, reserved matters, exit, drag / tag and valuation mechanics), and represents majority and minority shareholders in section 994 Companies Act 2006 unfair prejudice petitions when those arrangements break down.
Frequently Asked Questions
What is a shareholders' agreement and why do I need one?
A shareholders' agreement is a private contract between the shareholders of a company that governs their relationship, decision-making rights, transfers of shares, exit mechanics and dispute resolution. It sits alongside the articles of association but is typically more detailed and bespoke. It is especially important for joint ventures, minority shareholders, and founder-investor arrangements.
What should a UK–China joint venture shareholders' agreement cover?
Key provisions include board composition, reserved matters, deadlock resolution, share transfer restrictions, drag-along and tag-along rights, pre-emption on new issues, exit triggers, valuation mechanics, non-compete and non-solicitation provisions, confidentiality, governing law and dispute-resolution clauses. Cross-border JVs should also deal with language, translations, and cross-enforcement.
What are 'drag-along' and 'tag-along' rights?
Drag-along rights let a majority shareholder force minority shareholders to sell their shares on the same terms when a qualifying sale is triggered. Tag-along rights let minority shareholders require a majority to include the minority on the same terms if the majority sells. Both protect against outcomes where the minority is either left stranded or excluded from a sale.
What happens if shareholders disagree and there is deadlock?
A well-drafted SHA will contain deadlock-resolution provisions (escalation to directors or chairs, mediation, expert determination, buy-sell 'Russian roulette' or 'Texas shoot-out' mechanics, or winding up as a last resort). Without these, disputes can lead to costly section 994 Companies Act 2006 unfair prejudice petitions or just-and-equitable winding up.
Can I challenge a shareholders' agreement if my rights are being breached?
Yes. Breach of the SHA is a contractual claim and can be pursued in the High Court. Where the conduct also affects the company's affairs unfairly, a petition under section 994 of the Companies Act 2006 (unfair prejudice) is often the preferred route, allowing the court to make a wide range of remedial orders including a buy-out at a court-determined valuation.
What is a section 994 unfair prejudice petition?
A section 994 Companies Act 2006 petition enables a shareholder to apply to the court on the basis that the company's affairs are being or have been conducted in a manner unfairly prejudicial to their interests. Remedies include orders for the purchase of the petitioner's shares at a fair value, regulation of the company's future conduct, and restraint of directors. Leon Chua regularly acts for majority and minority shareholders in such proceedings.