Shareholders agreement for a company where one shareholder funds it and another runs it

A funder puts in the money and an operator puts in the work, and they own the company between them: the simplest structure in business and the one with the most ways to go wrong, because the funder's capital and the operator's time are measured differently and repaid differently. The agreement has to decide whether the money is shares or a loan, how and when the funder is repaid, what the operator may spend and earn, what the funder may veto, who pays when more money is needed, and how each gets out. I draft that agreement for both together, with a briefing session and a note on how it fits the articles, for a fixed fee of £995, delivered in five working days.

Who this is for

Funders and operators in England and Wales starting or running a company together, from a relative backing a family member's business to an investor backing an experienced manager, who want the money and the control settled in writing.

What matters in a funder-operator shareholders' agreement

The money as equity, loan or both

The funder's money can buy shares, which share in profits and are repaid only on a sale or a winding up, or be lent to the company as a shareholder loan, repaid with interest before profits are shared, or both, and the agreement should say which, with the loan's terms (interest, repayment schedule, security, subordination to the bank, conversion into shares on stated events) stated; the choice decides whether the funder is paid before the operator sees a dividend, and whether the funder's money is at risk alongside the operator's work or ahead of it. The accountants should advise both on the tax treatment of each route.

The funder's return and when it is paid

The agreement should state the funder's expected return and its mechanics: loan interest and repayment on a schedule the cash flow can meet, a preferred dividend on the funder's shares before ordinary dividends where the parties agree one (with any tax relief the funder claims checked, because preferential rights can disqualify it), a dividend policy within section 830 of the Companies Act 2006 for the rest, and the operator's obligation to prioritise the funder's repayment before increasing their own pay; a funder who does not know when the money comes back and an operator who does not know when they can pay themselves more are the two sides of the same clause.

The operator's authority, pay and the budget

The operator runs the business, and the agreement should give them authority over staff, suppliers, customers and spending within an annual budget both approve, a salary under a service agreement set by a process (a market rate, reviewed annually, increases subject to the funder's return being on track), and the freedom from interference that makes the arrangement workable; the budget is the boundary, and the agreement should say what the operator must do if it is exceeded (report, seek approval, cut costs) rather than leaving the funder to discover it.

The funder's protections and the operator's freedom

The funder should have vetoes over the matters that could lose their money (new shares, changes to the articles, borrowing or security above a limit, a sale of the business, a change of business, transactions with the operator's connected persons, the operator's pay above the agreed level, winding up), information rights (monthly accounts, the budget, notice of material events), and a seat or an observer right on the board; the operator should have everything else, and the agreement should say that the funder's consent on routine matters is not to be withheld unreasonably.

Failure, further funding and the funder's exposure

The agreement should say whether the funder is obliged to provide further money (a committed amount, or none), what happens if the company needs more and the funder declines (the operator may find another investor, with the funder's pre-emption under section 561 of the Companies Act 2006 and dilution of the funder's stake if they do not participate), what guarantees each has given and how they are shared, and what happens if the business fails (the loan's priority, the directors' duties under the Insolvency Act 1986, the operator's position as the director who ran it); a funder whose exposure is open-ended and an operator who is personally liable for the funder's decisions both need the agreement to say where their exposure stops.

The exit each is working towards

The agreement, with matching articles, should provide for the operator leaving (a bad leaver if by choice, with shares bought at a stated price and the funder deciding whether to find a new operator), for the funder wanting their money out (a put option at a stated valuation after a stated period, or repayment of the loan on notice), for a sale with drag-along and tag-along, and for the operator buying the funder out over time, which is the exit most funder-operator companies are built towards; the note on the articles addresses the share classes and transfer provisions under section 33 of the Companies Act 2006.

What it costs

Shareholders agreement, £995. An agreement between the shareholders of a private company, with a note on how it interacts with your articles. Five working days.

Buying online forms the engagement on payment. The scope is what the shareholders agreement page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A briefing session with all shareholders together, to work through the questions people avoid asking each other
• A shareholders agreement drafted for your actual situation rather than a precedent with the names changed
• A note on how the agreement interacts with your articles, and whether the articles need amending to make it work
• A plain English explanation of every material choice, so nobody signs something they have not understood
• One round of amendments
• Signature-ready documents

What is not included

• Acting for individual shareholders separately, because I act for you jointly
• Company valuation
• Tax structuring, which needs your accountant and should run alongside this
• Amended articles of association and IP assignments, which I quote separately
• Filing at Companies House
• Resolving a dispute that has already started

Questions I am often asked

Should the funder's money be shares or a loan?

A loan is repaid first and caps the funder's return; shares share the risk and the upside. Many agreements use both: a loan for the money that should come back on a schedule, and shares for the stake. The accountants advise on the tax of each.

As the operator, can the funder sack me?

Only under the leaver and deadlock provisions the agreement sets, and only if you are an employee under a service agreement with its own notice. The agreement gives the funder vetoes and information, not day-to-day control, and sets the process if the relationship fails.

As the funder, what if the business needs more money?

What the agreement says: you are obliged to provide it, or you are not, in which case the operator may bring in another investor and your stake may be diluted if you do not participate. The clause should be decided now rather than in the month the money runs out.

Related guidance and services

• Shareholders agreement, £995, the service this page describes
• Contract review, £495
• Employment contracts and handbooks, £595
• Shareholders agreement when one shareholder works in the business and one does not
• Shareholders agreement with a shareholder loan

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.