12 Mar 2025
Peterborough office
48 Broadway, Peterborough Cambridgeshire, PE1 1YW
01733 346 333 01733 562 338 enquiries@hegarty.co.ukStamford office
10 Ironmonger Street, Stamford Lincolnshire, PE9 1PL
01780 752 066 01780 762 774 enquiries@hegarty.co.ukOakham office
66 South Street, Oakham Rutland, LE15 6BQ
01572 757 565 01572 720 555 enquiries@hegarty.co.ukMarket Deeping office
27a Market Place, Market Deeping, PE6 8EA
01778 230 120 01778 230 129 enquiries@hegarty.co.uk12 Mar 2025
A shareholder agreement is one of the most important legal documents for any business with multiple owners. It defines the rights, responsibilities, and expectations of shareholders, helping to prevent disputes and protect the company’s future.
But what happens when conflicts arise? Disagreements over decision-making, ownership changes, or financial contributions can jeopardise business stability if risks aren’t effectively managed.
In this article, we’ll explore practical ways to manage risk in shareholder agreements, ensuring your business remains protected from costly disputes and unexpected challenges.
Even businesses with strong relationships between shareholders can face conflicts that threaten operations and growth.
Some of the most common risks include:
1. Shareholder Disputes
Disagreements over the direction of the business, financial contributions, or voting rights can create friction between shareholders. Without a clear dispute resolution process, conflicts can escalate into legal battles.
2. Ownership Changes and Exits
What happens if a shareholder wants to sell their shares or leave the company? Without clear terms, disputes over valuation, transfer rights, and buyout processes can arise.
3. Death or Incapacity of a Shareholder
If a shareholder passes away or becomes incapacitated, their shares may automatically pass to their estate or family members—who may have no interest in running the business. This can lead to ownership disputes and operational disruptions.
4. Unequal Shareholder Contributions
Not all shareholders contribute equally in terms of financial investment, time, or expertise. Without a structured agreement, disputes can arise over who is carrying the most weight in the business.
5. Minority Shareholder Protection
Minority shareholders (those with less than 50% of shares) may have limited control over decisions. Without protective provisions, they could be side-lined or forced out of the company unfairly.
To safeguard your business, a shareholder agreement should include clear, enforceable clauses that address these risks.
1. Dispute Resolution Mechanisms
2. Share Transfer Restrictions
3. Exit and Buyout Provisions
4. Death or Incapacity Protections
5. Minority Shareholder Rights
A poorly drafted or outdated shareholder agreement puts your business at risk.
At Hegarty, we specialise in drafting strong, tailored shareholder agreements to protect your business as well as resolving any shareholder disputes that may arise, through negotiation, mediation, or legal action. Our team of experts provide expert legal guidance on ownership structures and business succession planning.
