Shareholders agreement for three founders

Three founders can always form a majority, which solves the deadlock problem of two and creates the problem of three: any two can outvote the third on everything the law leaves to a majority, including removing them as a director. A shareholders' agreement for three founders is about protecting each founder from the other two on the matters that matter, while leaving the company able to decide. I draft that agreement for all three founders 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

Three founders in England and Wales starting or running a company together, with equal or unequal shares, who want the decisions, the exits and the protections agreed while the three of them agree.

What matters in a three-founder shareholders' agreement

Majority decisions and the risk of two against one

Ordinary resolutions pass with a bare majority of votes and special resolutions with three quarters, so with three equal founders any two can pass ordinary resolutions and all three are needed for special ones, while with unequal shares one founder may hold a majority alone; the agreement should start from the voting arithmetic the founders' shares produce, say which decisions the law would let a majority take, and decide which of those the founders want to require more than a majority for, because the default is that the third founder can be outvoted on most things.

The matters that need everyone

The agreement should list reserved matters requiring all three founders' consent, or a stated majority including a named founder: issuing shares and options, changing the articles, selling the company or its business, borrowing or guarantees above a limit, acquisitions, changing the nature of the business, dividends, directors' pay and transactions with founders or their connected persons, and appointing or removing directors; the list should be long enough to protect each founder and short enough that the company can run, and the agreement should say how decisions outside it are taken.

Board seats and the removal of a director

Each founder usually expects a seat on the board, and the agreement should give each the right to be a director while they hold a stated percentage, with the removal of a founder director requiring the founders' consent under the reserved matters; but shareholders can remove a director by ordinary resolution under section 168 of the Companies Act 2006 regardless of the agreement, and the only way to prevent two founders removing the third is a weighted voting provision in the articles on a resolution to remove a founder, which the note on the articles addresses.

Leaver provisions and valuation

The agreement, with matching articles, should require a founder who leaves to offer their shares to the others, at fair value for a good leaver and a lower price for a bad leaver, with the categories defined (death, illness and agreed departure as good; early resignation, breach and dismissal for cause as bad), the valuation method stated (an accountant's determination on a stated basis, or a formula), and payment spread where necessary; with three founders the agreement should also say how the remaining two share the leaver's shares and what happens if neither wants them.

Vesting and unequal contributions

Where the founders contribute differently (one full time, one part time, one money rather than time), the agreement should reflect it in the share split, in vesting (shares earned over a period, with unvested shares bought back at nominal value on early departure), or in a different class of shares, and should record each founder's role, commitment and pay; three founders who hold equal shares for unequal contributions will renegotiate the deal under pressure later, and the agreement should settle it now.

Dilution, new investors and selling

The agreement should protect each founder's pre-emption right on new shares, which section 561 of the Companies Act 2006 gives unless the articles disapply it, say how the founders will approach an investment round (the reserved matters, the valuation, a founder's right to participate), and provide drag-along at a stated majority so that an offer two founders accept at or above a minimum price takes the third with it on the same terms, with tag-along so that no founder can sell without the buyer offering for all; restrictive covenants, confidentiality and the relationship with the articles under section 33 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

Two of us hold sixty per cent between us. Can we be outvoted by the third?

Not on ordinary resolutions, and the third cannot block them. The third can block special resolutions only if they hold more than a quarter. The agreement decides which matters need everyone and which a majority can take, and protects each of you from the other two on those.

Can two founders remove the third as a director?

By ordinary resolution under the Companies Act, yes, whatever the agreement says. A weighted voting clause in the articles on a resolution to remove a founder prevents it, and the note on the articles covers whether yours need it.

What if one founder wants out after a year?

The leaver provisions decide the price and who buys. A founder leaving early for their own reasons is usually a bad leaver, with unvested shares bought back at nominal value and vested shares at the agreed price.

Related guidance and services

• Shareholders agreement, £995, the service this page describes
• Contract review, £495
• Employment contracts and handbooks, £595
• Shareholders agreement for two founders with equal shares
• Shareholders agreement for four or more founders

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.