Early stage shareholder agreement

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What's an early stage shareholder agreement, and when do you need it?

This template early stage shareholders agreement should be used by a private limited company where shares are being issued to new shareholders for the first time following the company’s incorporation.

Our template assumes that shares have already been issued to the founder(s) and that the company is a start-up receiving seed financing from friends, family or other private investors. (It is sometimes also called a ‘subscription and shareholder agreement’.)

Once you’ve got a signed subscription and shareholder agreement in place, then, when you’re bringing on board further shareholders (provided that you’re doing so on the same terms) they will not need to sign the shareholder agreement itself. Instead, they can simply sign a deed of adherence to it, which is a simpler document but that binds them, and you, to the same terms as the original shareholder agreement. You can use our deed of adherence for these purposes. There is one already attached to this template agreement at Annex 6.

Our template agreement assumes that you only intend to issue one class of share. Some companies may wish to create different classes of shares as a means of giving different rights to different shareholders (for example, they may want some shares to be non-voting, or that some shareholders receive dividend payments in priority to others). If you’re taking on employees and introducing an employee share incentivisation scheme, then this might be another reason for introducing another class of shares with different rights.

If you intend to issue different classes of shares, then on its current drafting, this shareholders’ agreement isn’t suitable for your company. But our experts can easily prepare something suitable that’s tailored to your intentions. Or you can use our template shareholder agreement containing different classes of shares as a starting point.