Key Points

• A shareholders’ agreement is a private contract between a company’s shareholders. Unlike the Articles of Association, it does not need to be filed at Companies House, and its contents remain confidential to the parties.
• Under section 994 of the Companies Act 2006, a minority shareholder can petition the court for relief where the company’s affairs are conducted in a way that is unfairly prejudicial to their interests. The Supreme Court confirmed in THG Plc v Zedra Trust Company (Jersey) Ltd [2026] UKSC 6 that no statutory limitation period applies to such petitions.
• A well-drafted shareholders’ agreement can narrow the practical scope of an unfair prejudice claim by setting out agreed rules in advance, without purporting to exclude section 994 altogether.
• Provisions worth including are pre-emption rights on share transfers, reserved matters requiring shareholder consent, drag-along and tag-along rights, and a clear mechanism for resolving deadlock.
• For SMEs, the cost of agreeing a shareholders’ agreement at the outset is almost always lower than the cost of resolving a dispute without one.

Every company with more than one shareholder needs a shareholders’ agreement. Without one, the rules governing how the business is owned and managed default to the Companies Act 2006 and whatever the Articles of Association say, which may bear no resemblance to what the shareholders actually agreed between themselves.

The risks of not having a shareholders’ agreement in place can be catastrophic. When relationships are good, the absence of a written agreement rarely causes problems. When they break down, which in owner-managed businesses happens more often than people expect, the absence of agreed-upon rules can turn a manageable disagreement into expensive litigation.

The good news is that putting an agreement in place is straightforward when the parties are aligned. Understanding what it should contain and why each clause matters is the first step.

Recent Case Law Every Shareholder Should Know About

The most significant recent development in shareholders’ dispute law came in February 2026, when the Supreme Court handed down its judgment in THG Plc v Zedra Trust Company (Jersey) Ltd [2026] UKSC 6. The case concerned whether a statutory limitation period applied to a petition brought under section 994 of the Companies Act 2006, which allows a shareholder to ask the court to intervene where the company’s affairs are conducted in a way that is unfairly prejudicial to their interests.

The Court of Appeal had held in 2024 that petitions seeking monetary compensation were subject to a six-year limitation period under section 9 of the Limitation Act 1980. The Supreme Court, by a majority of four to one, overturned that decision. The majority held that section 994 petitions fall within neither section 8 nor section 9 of that Act because the court is not directed to award any particular remedy. Since no specific sum is recoverable by virtue of section 994 alone, the relevant limitation provisions simply do not apply.

A minority shareholder can now petition in respect of conduct that occurred years, and potentially decades, before the claim is issued. The equitable doctrine of laches still applies, and courts may refuse relief where unreasonable delay has prejudiced the respondent. The ruling substantially extends the window during which past board decisions remain open to challenge, making thorough board minutes and well-drafted shareholders’ agreements considerably more important than before.

That ruling builds on the foundational principles established in O’Neill v Phillips [1999] UKHL 24, in which Lord Hoffmann confirmed that unfair prejudice must be grounded in legal rights or equitable principles. A shareholder cannot rely on a subjective sense of injustice. Because neither the profit-sharing arrangement nor the increased shareholding in that case had been formally agreed, Phillips had not acted unfairly by withdrawing from negotiations, and O’Neill’s petition failed. The case remains the leading authority on what counts as a legitimate expectation, and it shows precisely why oral understandings between co-founders, however sincerely intended, are no substitute for written terms.

Practical Guidance for Business Owners

In my experience, a shareholders’ agreement should be prepared when the company is set up, or at any point while the shareholders are on good terms. Because, and I can promise you this, attempting to negotiate one in the middle of a dispute is both harder and more expensive.

When drafting a shareholders’ agreement, I advise clients to consider including the following provisions:

• Pre-emption rights on share transfers. Under the Companies Act 2006, statutory pre-emption rights apply to the issue of new shares but not to the transfer of existing shares. A pre-emption provision in the shareholders’ agreement ensures that any shareholder wishing to sell must first offer their shares to the existing shareholders, protecting the group from unwanted third-party involvement.
• Reserved matters. These specify which decisions require shareholder consent above a certain threshold. Issuing new shares, taking on significant borrowing, changing the nature of the business, and selling key assets are typical examples. Reserved matters prevent a majority shareholder or a dominant director from making unilateral decisions that fundamentally alter what the other shareholders signed up to.
• Drag-along and tag-along rights. Drag-along provisions allow a majority to compel the remaining shareholders to join a sale on the same terms, making the company more attractive to acquirers who want to purchase the whole business. Tag-along provisions protect minority shareholders by ensuring they can participate in a sale on equivalent terms.
• Deadlock provisions. In a 50/50 company, disagreements can leave the business unable to make decisions. A deadlock clause provides a mechanism for resolving that impasse, whether through a structured negotiation process, mediation, or a buy-out trigger.
• Good leaver and bad leaver provisions. These govern what happens to a shareholder’s shares upon leaving the business. A good leaver typically receives fair value for their shares; a bad leaver may receive a lower amount. Without these provisions, a departing shareholder retains their shares regardless of the circumstances of their departure.

A shareholders’ agreement cannot exclude section 994 of the Companies Act 2006 on public policy grounds. What it can do is narrow the practical scope of a potential petition by agreeing in advance on the rules that apply. In Fulham Football Club (1987) Limited v Sir David Richards [2011] EWCA Civ 855, the Court of Appeal held that an arbitration clause could redirect the forum for resolving a section 994 dispute, including a dispute-resolution escalation clause that progresses from negotiation to mediation and then to arbitration, can reduce the risk of contested court proceedings while preserving each party’s substantive rights.

Policy and Future Direction

The Supreme Court’s decision in THG v Zedra has wider implications beyond shareholders’ disputes. The reasoning creates uncertainty about the limitation periods applicable to claims under sections 238, 239, 339, 340, and 423 of the Insolvency Act 1986, which were previously understood to fall under sections 8 or 9 of the Limitation Act 1980. That uncertainty will take time to resolve and will generate further litigation before it does.

The courts remain willing to intervene in closely held company disputes where shareholders have been treated unfairly, and the absence of a limitation period means that old grievances can resurface at any time. Clear written rules agreed at the outset are both good commercial sense and sound risk management. Our shareholders’ dispute service can advise you whether a petition is viable or how to respond to one.

Frequently Asked Questions

Does a shareholders’ agreement need to be filed at Companies House?

No, unlike the Articles of Association, a shareholders’ agreement is a private document. It does not need to be filed at Companies House. Its contents remain confidential, which is one reason it is the appropriate place for commercially sensitive terms such as share valuations, profit-sharing arrangements, and director remuneration.

Can I rely on our Articles of Association instead?

The Articles of Association are a public document setting out the company’s basic constitutional rules. They can be amended to include certain shareholder protections, but any terms added become publicly available. A shareholders’ agreement sits alongside the Articles and addresses the practical, commercial, and interpersonal dimensions of the business relationship that the Articles are not designed to cover.

What happens if shareholders disagree and there is no agreement in place?

Without an agreement, the parties must either negotiate a resolution informally or resort to the statutory remedies available under the Companies Act 2006. A minority shareholder may petition under section 994 for relief from unfair prejudice, or apply for a winding-up order on just and equitable grounds under section 122(1)(g) of the Insolvency Act 1986. Both routes are slow, expensive, and uncertain.

Can a shareholders’ agreement be amended after it has been signed?

Yes, a shareholders’ agreement can be amended, but typically only with the unanimous consent of all parties who signed it, unless the agreement itself provides a different mechanism. Unanimity is both a protection and a limitation: it prevents one party from changing the rules unilaterally, but it can make updating the agreement difficult as the business evolves.

Is there any time limit on when I can bring an unfair prejudice petition?

Following the Supreme Court’s decision in THG Plc v Zedra Trust Company (Jersey) Ltd [2026] UKSC 6, no statutory limitation period applies to section 994 petitions. The equitable doctrine of laches still applies, and a court may refuse relief where a petitioner has delayed unreasonably and that delay has prejudiced the respondent. Shareholders who believe they may have a claim should seek advice promptly rather than waiting.

As external risk management and legal specialists, we can assist you with drafting or reviewing a shareholders’ agreement, advising on disputes, or reviewing your company’s governance arrangements. Our virtual in-house counsel service provides ongoing access to specialist commercial law advice at a fixed monthly retainer.

To find out more about any matters discussed in this article, please email us at  info@43legal.com or call 0121 249 2400. 

The content of this article is for general information only.  It is not, and should not be taken as, legal advice.  If you require any further information in relation to this article, please contact 43Legal. 

Melissa Danks is the founder of 43Legal. She has over 20 years’ experience as a solicitor working within the legal sector dealing with issues relating to risk management, dispute resolution, and advising in-house counsel in SMEs and large companies. Melissa has extensive expertise in providing practical, valuable, modern legal advice on large commercial projects, joint ventures, data protection and GDPR compliance, franchises, and commercial contracts. She has worked with stakeholders in multiple market sectors, including IT, legal, manufacturing, retail, hospitality, logistics and construction. When not providing legal advice and growing her law firm, Melissa spends her time running, walking in the countryside, reading and enjoying downtime with close friends and family.