Both the articles of association and a shareholders' agreement govern how a company is owned and run, but they are different documents with different roles, and most well-run private companies have both. Understanding the difference helps you put the right terms in the right place. Here is a plain-English guide for England and Wales under the Companies Act 2006.
What each document is
- Articles of association, the company's constitution. Every company must have articles; they set out the core rules for running the company (directors' powers, shares, meetings, decision-making). They form a statutory contract between the company and its members (Companies Act 2006, s 33), and bind all present and future shareholders.
- Shareholders' agreement (a private contract between some or all of the shareholders (and sometimes the company). It governs the relationship between the owners) often covering matters they want to keep confidential or more detailed than the articles.
The key differences
| Articles of association | Shareholders' agreement | |
|---|---|---|
| Required? | Yes (every company must have them | No) optional |
| Public? | Filed at Companies House (public) | Private (not filed) |
| Who is bound? | All members, present and future | Only the parties who sign it |
| How to change? | Special resolution (75% of members) | Usually unanimous consent of the parties |
| Typical content | Constitutional rules (shares, directors, meetings) | Commercial deal between owners (reserved matters, exit, deadlock) |
Why have both?
The two work together:
- The articles provide the public, constitutional framework.
- The shareholders' agreement adds private, tailored protections that owners may not want on the public register, such as:
- reserved matters requiring specific shareholder consent;
- minority protections and information rights;
- share transfer controls, pre-emption, tag-along and drag-along;
- dividend policy;
- deadlock resolution (especially 50:50 ventures);
- good leaver/bad leaver terms; and
- non-compete and confidentiality.
A particular advantage of the shareholders' agreement is confidentiality (it isn't public) and that it can only be changed by agreement of the parties, giving a minority shareholder protection that the articles (changeable by a 75% majority) cannot.
Watch for conflicts
Because both documents can deal with similar issues, they must be consistent. If they conflict:
- the articles continue to govern the company's constitutional position and the validity of company acts; the shareholders' agreement gives the parties contractual rights and remedies between themselves (such as a breach claim), but does not itself override or displace the articles.
- If governance rules need to bind the company constitutionally, the articles must be amended to align with the agreement.
A shareholders' agreement cannot stop the company exercising its statutory powers, but the shareholders can agree between themselves how they will vote. Always align the two when drafting.
Key takeaways
- The articles are the company's public, mandatory constitution (a statutory contract binding all members, changed by 75% special resolution).
- A shareholders' agreement is an optional, private contract between the owners who sign it, usually changed only by unanimous consent.
- Use the articles for constitutional rules and the shareholders' agreement for private commercial protections (reserved matters, transfers, deadlock, exit).
- Keep the two consistent: the articles govern the company's constitutional position; the shareholders' agreement gives the parties contractual rights between themselves; if constitutional alignment is needed, amend the articles too.
Sources
- Companies Act 2006: articles of association as the company's constitution; s 33 (articles as a statutory contract); s 21 (amending articles by special resolution)
- General contract law (shareholders' agreement as a private contract; amendment by agreement of the parties)
- Drafting practice on aligning articles and shareholders' agreements in England & Wales
--- This article is general information about the law of England & Wales as at 2026, not legal advice. For advice on your circumstances, consult a qualified solicitor.