Shareholders agreement versus articles of association

Every company has articles of association and most owner-managed companies have never read them; a shareholders' agreement is the document the owners write for themselves. The two do different jobs: the articles are the company's constitution, public, binding on every shareholder and changeable by a special resolution, while the agreement is a private contract binding only the people who sign it and changeable only with their consent. The provisions that restrict what can be done with shares have to be in the articles to work, and the provisions that the owners want kept private or made unchangeable without everyone's agreement belong in the agreement. This page explains which goes where. I draft the agreement with a note on the articles for a fixed fee of £995, delivered in five working days, and quote separately for amended articles.

Who this is for

Shareholders, founders and directors in England and Wales who want to understand what the two documents do before they instruct either, and anyone who has been told their articles need changing and wants to know why.

How a shareholders' agreement and the articles work together

What the articles are and who they bind

The articles of association are the company's constitution, registered at Companies House and public, and under section 33 of the Companies Act 2006 they bind the company and every member as if each had signed them, including shareholders who join later; a private company that adopted no articles of its own has the model articles in the Companies (Model Articles) Regulations 2008, which provide for a board that runs the company, directors who may refuse to register a share transfer, dividends declared by ordinary resolution, and little else that an owner-managed company needs. The articles can be changed by special resolution under section 21, which needs three quarters of the votes, so a shareholder with more than a quarter can block a change and one with less cannot.

What a shareholders' agreement is and who it binds

A shareholders' agreement is a contract between the shareholders who sign it (and often the company) governing how they will exercise their rights and run the company: reserved matters, information, dividends, board composition, transfers, leavers, exits, covenants and deadlock; it is private, it binds only its signatories (a new shareholder must sign a deed of adherence), it can be changed only as its own terms allow, usually with every party's consent, and it is enforced as a contract, by damages or injunction, rather than through the company's constitution. Where the agreement and the articles conflict, the agreement usually provides that the shareholders will amend the articles or vote to give effect to the agreement.

Which provisions must go in the articles

A restriction on the transfer of shares binds the shares only if it is in the articles, because the company registers transfers under its articles and a transfer in breach of a mere contract is still a transfer: pre-emption rights on transfer, compulsory transfers of leavers' shares and the price, drag-along and tag-along, put and call options, deemed transfer notices, the directors' authority to refuse registration and to sign transfers as attorney, and the rights attached to different classes of shares (votes, dividends, capital) all need to be in the articles, as do weighted voting provisions on the removal of a director under section 168 of the Companies Act 2006 and any restriction on the directors' authority that is to bind the company; the shareholders' agreement can and should repeat them, but the articles are what make them work.

Which provisions belong in the agreement

Provisions the shareholders want kept private (the dividend policy, the valuation formula, founder pay, the business plan), provisions that bind the shareholders personally rather than the company (restrictive covenants, confidentiality, non-solicitation, obligations to fund, guarantees and indemnities between shareholders), provisions that should not be changeable by a three-quarters majority (reserved matters and vetoes, which a majority could otherwise strip from the articles by special resolution), and provisions about how the shareholders will vote and behave (board appointments, deadlock, information) belong in the agreement, where every party's consent is needed to change them and the public cannot read them.

Changing each document and the entrenchment question

The articles are changed by special resolution and the change binds everyone, so a provision placed only in the articles can be removed by a three-quarters majority against a minority's wishes, which is why minority protections go in the agreement; the Companies Act 2006 allows articles to be entrenched under section 22 so that a provision can be changed only by a higher majority or with specified consent, which is sometimes used for the transfer provisions, and the agreement can require the shareholders not to vote to change the articles without the consents it specifies, which achieves the same result as a matter of contract. The two mechanisms are chosen in the note on the articles.

The note on the articles that comes with every agreement

Every shareholders' agreement I draft comes with a note that reads the company's current articles (which I obtain from Companies House), identifies the provisions in the agreement that need the articles' support, says whether the current articles already provide them, and lists the changes needed, with amended articles quoted separately where the changes are more than a few; the note is the bridge between the two documents, and a shareholders' agreement delivered without it is an agreement whose transfer provisions may not work. The agreement itself contains an obligation on the shareholders to adopt the amended articles and to vote accordingly.

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

We have a shareholders' agreement. Do we need to change the articles as well?

If the agreement contains transfer restrictions, leaver provisions, drag-along or options, yes, because those bind the shares only through the articles. The note on the articles that comes with the agreement says what needs changing.

Can we put everything in the articles and skip the agreement?

You can put the transfer and share provisions there, but the articles are public and changeable by three quarters, so a minority's vetoes and anything you want private belong in the agreement. Most companies need both.

Who changes the articles, and how?

The shareholders, by special resolution, filed at Companies House with the new articles. I quote for amended articles separately from the agreement; the note says whether they are needed.

Related guidance and services

• Shareholders agreement, £995, the service this page describes
• Contract review, £495
• Employment contracts and handbooks, £595
• Shareholders agreement with reserved matters
• Shareholders agreement with pre-emption rights on share transfers

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.