Shareholders agreement for a management buyout team

A management buyout puts a team of colleagues into business together as owners, usually with a funder or a seller who is owed money sitting above them, and the team's own agreement is the document that is forgotten in the rush to complete the purchase. It has to set the team's shares and contributions, the deferred consideration they will carry, the terms the funder will impose on all of them, the roles and pay after completion, and what happens when one of them leaves the company they bought. I draft that agreement for the team 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; the purchase itself is a separate matter.

Who this is for

Management teams in England and Wales buying the company they work for from its owners, with or without external funding, who want the arrangement between themselves agreed before completion.

What matters in a management buyout team's shareholders' agreement

The team's own deal before the funder's

The buyout documents (the share purchase agreement, the funder's investment agreement, the loan notes) govern the team's relationship with the seller and the funder, and the team's shareholders' agreement governs the team's relationship with each other: who leads, how the team's shares are split, how the team's decisions are taken, and what happens between the members when one leaves; it should be agreed before the funder's documents are signed, because the funder's agreement will assume the team speaks with one voice, and the team should know what that voice says.

The shares, the price and who pays what

The agreement should record each member's shareholding, what each pays for it (cash, a loan from the company or the funder, sweat), the vesting that applies, and any difference between the leader's stake and the others', with the team's equity usually sitting alongside the funder's preference shares or loan notes; the price and the structure have tax consequences for each member (the restricted securities rules in the Income Tax (Earnings and Pensions) Act 2003 and the election under section 431) that the team's accountants should advise on before completion, and the agreement should record the advice taken.

The deferred consideration and the seller's continuing interest

Buyouts are often funded by the seller through deferred consideration, loan notes or an earn-out, with the seller retaining a stake or a seat, and the agreement should say how the team shares the obligation to pay the seller, what happens if the company cannot pay (the seller's security, the team's guarantees, the indemnities between members), and how the team deals with a seller who remains a shareholder or a director, with the seller's rights set out in the purchase documents and the team's response coordinated through its own agreement.

The funder and the terms it will impose

A private equity or debt funder will require an investment agreement with reserved matters, information rights, a board seat, swamping rights on default, good and bad leaver provisions for the management shares, and ratchets or incentives, all of which bind the team; the team's agreement should record what the funder requires, how the team votes its shares together on matters the funder puts to shareholders, how the team's representatives on the board are chosen, and how the team responds to a funder's enforcement, because a divided team is a team the funder deals with one member at a time.

Roles, pay and departures from the team

The agreement should record each member's role and service agreement after completion, the process for setting pay (the funder usually requires a remuneration committee), and the leaver provisions between the team: a member who leaves transfers their shares at the good or bad leaver price under the funder's documents, and the agreement should say who among the team may take them up, how the leaver is released from the team's guarantees and indemnities, and what the leaver owes the others; a buyout team losing a member in the first years is common, and the agreement should treat it as expected.

The exit the team is buying towards

The team buys the company to sell it or to own it, and the agreement should say which, with the funder's exit horizon and the team's obligations on an exit (to support a sale process, to give warranties within a cap, to accept drag-along) recorded, and the team's own drag-along and tag-along for a sale where the funder has left or never existed; the note on the articles addresses the share classes and transfer provisions, which the funder's lawyers will usually draft and the team should understand 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

The funder is giving us an investment agreement. Do we still need our own?

The team does. The funder's agreement governs your relationship with the funder; it does not say how the team decides, how its shares are split, or what happens between you when one of you leaves. The team's agreement does.

We are buying with deferred consideration to the seller. Who is liable if we cannot pay?

The company, and the members under any guarantees the seller took. The agreement sets the indemnities between members so that the burden is shared in proportion, and says how a leaver is released.

Should the managing director have more shares than the rest of the team?

That is the team's decision, and most teams weight the leader's stake. The agreement records the split and the vesting, with the accountants advising each member on the tax of what they receive.

Related guidance and services

• Shareholders agreement, £995, the service this page describes
• Contract review, £495
• Employment contracts and handbooks, £595
• Shareholders agreement for a company with a lender
• Shareholders agreement for a company planning to sell within five years

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.