Two people agree to hold seventy and thirty per cent of a company. They assume the arithmetic settles the question of control. It rarely does. A shareholders' agreement, and the articles that give it teeth, can hand a thirty per cent holder a veto over almost every decision that matters — or leave a seventy per cent holder unable to sell without the other's consent.
These are the six places to look first.
1. Reserved matters
A list of decisions that cannot be taken without the affirmative vote of a particular shareholder or their nominee director. A short list — issuing shares, taking on debt above a threshold, changing the business — is normal and reasonable. A long one that reaches into hiring, budgets and ordinary purchases converts a minority stake into joint control. Read this list as if the relationship has already broken down.
2. Board composition and the casting vote
Who nominates how many directors, what makes a valid quorum, and whether the chairman has a second or casting vote. If a quorum requires the minority's nominee to attend, non-attendance becomes a veto by absence. Provisions for adjourned meetings with a lower quorum are the usual answer.
3. Transfer restrictions
A right of first refusal obliges a selling shareholder to offer shares to the others before going outside. A right of first offer works the other way round. Both slow a sale down; only one of them lets the other side match a third party's price. Whichever is chosen, the mechanics — notice period, valuation method, completion timeline — matter more than the label.
4. Tag-along and drag-along
Tag-along protects the minority: if the majority sells, the minority can join on the same terms. Drag-along protects the majority: it can compel the minority to sell into a clean exit. Most disputes over these clauses are about thresholds and price floors, not about the principle.
5. Anti-dilution and pre-emption
Whether existing shareholders must be offered new shares before outsiders, and what happens if a later round prices shares lower than an earlier one. Full-ratchet protection can wipe out a founder's stake in a down round; broad-based weighted average is the more common compromise.
6. Deadlock and exit
What happens when the shareholders simply cannot agree. Options run from a referral to nominated senior people, through buy-sell mechanisms where one side names a price and the other chooses to buy or sell at it, to a straightforward put option at a valuation formula. A shareholders' agreement without any deadlock provision is a plan to litigate.
None of this is exotic drafting. It is the ordinary architecture of a company with more than one owner, and it costs far less to settle at the start than to argue about later.