Shareholders agreement when one shareholder works in the business and one does not

When one shareholder runs the business and the other only owns part of it, each thinks the other is getting the better deal: the worker sees an owner paid for doing nothing, the owner sees a worker paying themselves from the owner's profits. The agreement separates pay for working from the return on owning, gives the worker the authority to run the business and the owner the information and the vetoes that protect their stake, and sets the price each receives on exit, which should reflect what each created. I draft that agreement for both shareholders 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

Shareholders in England and Wales in companies where one owner works full time and the other is a family member, a friend, a former colleague or an investor holding shares without a role, who want the arrangement to survive the first disagreement about money.

What matters when one shareholder works and one does not

Pay for working and dividends for owning

The working shareholder is paid a salary under a service agreement for the work, set by a process the agreement states (a market rate, reviewed annually, with any bonus by reference to results), and both shareholders receive dividends in proportion to their shares under a policy that distributes a stated proportion of profits after retaining what the business needs, within section 830 of the Companies Act 2006; the agreement should state both so that the worker's pay is not a dividend by another name and the owner's dividend is not at the worker's discretion, with directors' loans needing approval under section 197 of the Act.

What the working shareholder may decide alone

The worker runs the business and the agreement should say so: authority over staff, suppliers, customers, pricing and spending within an approved budget, without reference to the non-working shareholder, because an owner who must be consulted on every hire makes the business unmanageable and the worker resentful; the budget, approved annually by both, is the boundary of that authority, and the agreement should say how it is set and what happens if it is exceeded.

What the non-working shareholder needs to know and approve

The non-working shareholder should receive management accounts at stated intervals, the budget, the annual accounts and notice of material events, and should have a veto over the reserved matters that could damage their stake: new shares, changes to the articles, a sale of the business, borrowing or security above a limit, a change of business, transactions with the worker's connected persons, the worker's pay above the agreed level, and winding up; the list protects the owner and leaves the worker to work, and the agreement should say that consent on routine matters is not to be unreasonably withheld.

If the working shareholder stops working

The deal depends on the worker working, and the agreement, with matching articles, should say what happens if they stop: by choice (a bad leaver, with their shares offered to the owner or the company at a stated price), through illness or death (a good leaver, at fair value, with the owner deciding whether to find a new manager or sell), or through a dispute (the deadlock and leaver provisions); it should also say what the owner may do if the worker underperforms, which is the question owners ask and the agreement should answer with a process rather than a veto.

The value each creates and the price on exit

The worker creates the business's value by working and the owner by funding it, and the agreement should set a valuation method for either shareholder's exit that both accept as fair (an accountant's determination on a stated basis, a formula, or a sliding scale that rewards the worker's years), with pre-emption rights, a right of first refusal, and payment over time; a worker bought out at a price that ignores their work, or an owner bought out at a price that ignores their capital, is the argument the valuation clause exists to settle.

Selling or closing

A sale should need both shareholders or be subject to drag-along at a stated minimum price, with tag-along for the owner so that the worker cannot sell control without them, and the agreement should say what happens if the business fails (the directors' duties under the Insolvency Act 1986, the owner's position as a shareholder who was not a director, and the guarantees each has given); restrictive covenants on the worker for a period after they leave, confidentiality on both, and the note on the articles addressing the transfer provisions under section 33 of the Companies Act 2006 complete it.

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

I do all the work and my co-shareholder does nothing. Why should she get half the profits?

Because she owns half the shares; the agreement pays you for the work through a salary set by a process, and both of you for ownership through dividends. If that still feels wrong, the share split or a vesting arrangement is the answer, not the dividend policy.

As the non-working shareholder, how do I know what is going on?

Through the information rights the agreement gives you: management accounts, the budget, the annual accounts and notice of material events, plus vetoes over the decisions that could damage your stake.

What if the working shareholder just stops turning up?

The leaver provisions treat it as a bad leaver departure, with their shares offered at the stated price, and the deadlock process applies if they will not go. Without the agreement, you own half of a business nobody is running.

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 where one shareholder funds it and another runs it
• Shareholders agreement with a passive investor

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.