Starting a business can be exciting – especially when you’re doing it with friends, colleagues or family members. In the early days, optimism runs high and it’s easy to assume that everyone will always agree on the direction of the business. However, as your company grows, so too can differing opinions, pressures, and expectations. That’s where a Shareholders’ Agreement becomes invaluable. At Dillon Solicitors, we regularly advise business owners across Dublin on how to safeguard their interests and avoid disputes by putting the right agreements in place from the outset – or even later, if one was never drafted.
What Is a Shareholders’ Agreement?
A Shareholders’ Agreement is a legally binding contract between the shareholders of a company. It sets out the rights, responsibilities, and obligations of each shareholder and provides a clear framework for how the business should be managed.
While a company’s constitution covers certain company law matters, a Shareholders’ Agreement goes further – addressing practical, day-to-day issues such as:
- How decisions are made and what requires unanimous consent
- How profits and dividends are distributed
- How new shares can be issued or existing ones sold
- What happens if a shareholder wants to exit the business
- Procedures if a shareholder dies, becomes incapacitated, or wants to sell
- How disputes between shareholders will be resolved
Why It Matters – Even for Friends and Family Businesses
Many businesses in Ireland start between friends, family members, or close colleagues who trust each other and believe there’s no need for formal agreements. Unfortunately, this is where things can go wrong.
Disagreements don’t always stem from bad intentions – they can arise from miscommunication, changing personal circumstances, or simply different visions for the company’s future.
Here are some common scenarios:
- One shareholder wants to sell their shares and move on, but others aren’t ready to buy them.
- The business starts performing well, and there’s disagreement on how profits should be distributed.
- A shareholder passes away, and their family inherits the shares – creating tension within the company.
- One director is doing most of the work, leading to disputes about salaries or dividends.
A well-drafted Shareholders’ Agreement helps prevent these issues from escalating. It acts like an insurance policy for your business relationships – setting expectations clearly and providing a roadmap for resolving problems fairly.
What Happens Without One?
Without a Shareholders’ Agreement, disputes can quickly become expensive, stressful, and damaging to the business. In Ireland, company law (primarily the Companies Act 2014) provides a limited framework for dealing with shareholder disputes – but it doesn’t always offer the flexibility or protection that smaller businesses need.
Without an agreement:
- Minority shareholders may have little say in key decisions.
- Exiting shareholders may struggle to sell their shares.
- There may be no clear dispute resolution process, leading to costly litigation.
- Personal relationships between shareholders can deteriorate – sometimes irreparably.
In short, having no agreement often means relying on trust and goodwill alone – which isn’t
enough once the business becomes more complex or valuable.
It’s Never Too Late to Put One in Place
Many business owners assume a Shareholders’ Agreement can only be made when the company is first formed. That’s not true. If your business has evolved – perhaps you’ve taken on new investors, directors, or changed your structure – it’s never too late to create one. In fact, reviewing your company’s governance as it grows is an important part of good business management.
At Dillon Solicitors, we often work with established companies who didn’t put a Shareholders’ Agreement in place at the beginning. We help them design an agreement that reflects their current structure and future goals, addressing key issues such as:
- Ownership changes and share valuations
- Roles and responsibilities of directors
- Decision-making powers
- Dividend and salary policies
- What happens if someone wants to leave, sell, or retire
Formalising these matters gives everyone clarity and helps maintain healthy working relationships.
Key Benefits of a Shareholders’ Agreement
Prevents Disputes: By setting clear rules for how the business operates and how disagreements are handled, an agreement significantly reduces the likelihood of disputes.
Protects All Shareholders: It ensures that both majority and minority shareholders are treated fairly, with defined rights and protections.
Clarifies Decision-Making: Everyone knows how key business decisions are made — from
appointing directors to approving new projects or financial investments.
Ensures Continuity: If a shareholder leaves, retires, or passes away, the agreement
outlines what happens next, preventing disruption to the business.
Provides a Roadmap for Growth: As your company expands, having agreed structures in
place makes it easier to attract new investors or partners who want to see that governance is
handled professionally.
Commonly Overlooked but Crucial
It’s understandable why many small or family-run businesses skip this step – at the start, everyone is focused on growth, and formal legal documents might feel unnecessary or even awkward to discuss.
But the reality is that successful businesses evolve, and relationships change. The best time to agree on how you’ll handle disagreements is before they happen. A Shareholders’ Agreement doesn’t signal mistrust – it demonstrates foresight, professionalism, and respect for all involved.
Getting the Right Advice
Every business is unique and so should be its Shareholders’ Agreement. A one-size-fits-all template rarely covers the specific needs of your business.
Our Commercial and Business Law team at Dillon Solicitors works closely with company founders, directors, and investors to create tailored agreements that protect your interests, promote transparency, and minimise future risk.
We take time to understand your business, your goals, and your relationships, ensuring that your agreement supports long-term success – not just short-term peace of mind.
Protect Your Business. Protect Your Future
Whether you’re setting up a new company or have been trading for years without a formal agreement, now is the time to take action.
Contact Dillon Solicitors today to speak to our experienced commercial law solicitors in Dublin about drafting or reviewing a Shareholders’ Agreement that works for your business.
We’re here to make the process clear, practical, and stress-free – so you can focus on what you do best: running your business.
