Glossary · Ownership

What is Shareholders' agreement

Definition

The contract between owners setting out control, decision rights, share transfers and what happens when someone leaves or the business is sold.

Applies to: US and UK · Reviewed by James Doyle

In practice

Reserved matters decide which choices need investor consent — usually borrowing, hiring above a threshold, and changing the business plan.

Leaver clauses are where founders get hurt. Understand good-leaver and bad-leaver definitions before signing, not during a dispute.

The share of a launch business owned by each party. In a backed recruitment launch it defines control, exit proceeds and who decides what.

Earning equity over time rather than receiving it all on day one, usually across three or four years with a one-year cliff.

Part of a sale price paid later, conditional on the business hitting agreed performance targets after completion.

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