Let’s be honest—when you’re starting a business, you’re not thinking about things going wrong. You’re dreaming big: growth, disruption, profit, impact. And that’s exactly where most business owners slip up. Because here’s the reality: what protects your business when the dream team turns into a legal nightmare isn’t luck—it’s your shareholder agreement.
Hi—I’m Mariyam Ferreira, and I run a business. I’ve built companies, worked with other founders, and I’ve seen behind the curtain when things fall apart. Alongside me is David Hughes, our seasoned corporate solicitor here at Aristone Solicitors, with decades of experience advising companies through both their best days—and their worst.
Together, we want to tell you this: your shareholder agreement could be the most important document you ever sign.
Skip it, and you risk losing control, bleeding cash, and watching everything you built unravel—just because the foundations weren’t there when it mattered.
Why a Shareholder Agreement Isn’t Optional—It’s Critical
Too many people think a shareholder agreement is just a bit of legal housekeeping. It’s not. It’s your playbook for what happens when business partners stop seeing eye-to-eye, or when life throws a curveball—like a messy divorce, an unexpected death, or a founder who becomes unfit to lead.
David has seen countless cases where directors relied on trust and friendship—only to end up in legal stand-offs because there was no formal agreement to fall back on. Trust us, that “handshake understanding” won’t hold up when money, control, and reputations are on the line.
Here’s what most founders never ask themselves until it’s too late:
What happens if one of your directors goes off the rails?
A Real-Life Case: When a Founder Becomes a Liability
Let us paint the picture. A business is thriving. Clients are happy. The founding team is tight-knit—or so it seems. Then one of the directors starts slipping. They miss meetings. Clients begin to ask questions. Internally, things get chaotic.
This wasn’t theoretical—we advised on this exact scenario. That director, a founding shareholder, was battling alcoholism. It began to affect their judgement, reliability, and ultimately, the business’s reputation. But despite the obvious impact, removing them wasn’t simple.
Why? Because there was no robust shareholder agreement in place. And under UK law, things get tricky fast:
- The legal bar for “gross misconduct” is much higher than most people think.
- Alcoholism is classed as a disability under the Equality Act 2010, which means legal protections kick in.
- The business had no agreed internal procedures to manage director (responsibilities) conduct, suspension, or share buybacks.
The result? Months of stress, a costly legal battle, and a team on the brink. And all of it could’ve been avoided with the right documents in place from day one.
What Every Business Owner Needs in Place—Before Things Go Wrong
If you’re in business with other shareholders, don’t wait until things go sideways to get your legal house in order. Based on David’s legal expertise and my own experience as a founder, here’s exactly what we recommend.
Start with a well-drafted shareholder agreement.
This isn’t just paperwork—it’s your legal shield. Your agreement should set out how decisions are made, what happens when someone wants to exit, and what you can do if a shareholder is no longer acting in the company’s best interests. Think of it as your contingency plan for the people problem you never thought you’d face.
Spell out how you’ll handle misconduct, incapacity, and toxic behaviour.
The language in your shareholder agreement must be crystal clear about what happens if a director becomes incapacitated, stops performing, or starts causing reputational damage. You need flexibility—clauses that allow for investigation, temporary suspension, or even a forced buyout when needed.
Don’t forget employment contracts—especially for directors.
Many directors are also employees, which means their employment rights are separate from their shareholder rights. A strong director service agreement should include detailed disciplinary procedures, clear performance expectations, and tightly written termination clauses. This gives you another tool if the shareholder route is blocked.
Establish internal policies and a staff handbook—and stick to them.
HR policies aren’t just for big companies. They protect you. They define how internal investigations are handled, when you bring in occupational health, and how you manage protected characteristics like addiction in a legal, fair, and defensible way. Without these? You’re wide open to Employment Tribunal claims.
The Real Cost of Doing Nothing
We’ve worked with businesses that spent tens of thousands in legal fees just trying to remove one toxic shareholder. We’ve seen founders lose investor trust, alienate their teams, and miss major growth opportunities because internal politics took over.
The damage isn’t always obvious at first—but it adds up fast:
Lost time.
Lost money.
Lost momentum.
And sometimes, the loss of the business itself.
It can burn you out—mentally, emotionally, and financially. You might even find yourself thinking about walking away, questioning whether it’s all worth it. But remember: this business you’ve built, the team that relies on you, the reputation you’ve worked so hard to earn—it all deserves protection.
Ask Yourself – Right Now:
- Do you have a comprehensive shareholder agreement?
- Are your employment contracts and HR policies strong enough to protect the business if someone goes rogue?
- Could you remove a director legally, fairly, and efficiently if they became unfit to serve?
If you hesitated answering any of those, you already know what needs to happen.
Let’s Future Proof Your Business
At Aristone Solicitors, we help founders like you build businesses that aren’t just profitable—but protected. Whether you’re drafting your first shareholder agreement or reviewing one that’s no longer fit for purpose, David Hughes and our team are here to guide you with legal clarity, commercial sense, and zero fluff.
For bespoke advice on shareholder agreements, director contracts, or internal policy reviews, get in touch today:
Luton Office: +44 1582 383 888
London Office: +44 2034 393 888
St Albans Office: +44 1727 519 888
Or contact us using our online contact form and a member of our team will get back to you promptly.
