Yes, but only between the shareholders who signed it. A shareholders’ agreement is a private contract, so it can include a clause saying it prevails over the articles of association if they conflict, and the signatories must then vote to give effect to it. It cannot bind the company’s statutory powers, third parties or shareholders who never signed it.
Most Scottish companies with more than one owner need both constitutional documents and a private agreement, and the way they interact matters. This guide explains what each document does, how conflicts are resolved, where the limits lie under the Companies Act 2006, and how to make sure your articles and shareholders’ agreement work together.
In brief
- The articles of a company are its public constitution, filed at Companies House and binding on the company and every shareholder (Companies Act 2006, section 33).
- A shareholders’ agreement is a private contract between the shareholders who sign it, and often the company too.
- A “supremacy” or “conflict” clause says the shareholders’ agreement prevails over the articles as between the parties.
- The company cannot contract out of its statutory power to change its articles, but shareholders can agree among themselves how they will vote.
- The best approach is to align the two documents so conflicts never arise.
On this page
- Articles of association and shareholders’ agreements compared
- How can a shareholders’ agreement override the articles?
- The limits: what a shareholders’ agreement cannot do
- Which provisions belong in the company articles and which in the shareholder agreement?
- Why it matters for a minority shareholder
- Practical checklist to protect your business
- Frequently asked questions
Articles of association and shareholders’ agreements compared
| Articles of association | Shareholders’ agreement | |
|---|---|---|
| Nature | Constitutional document of the company | Private contract between the shareholders |
| Public or private? | Public, filed at Companies House | Private document, not filed (in most cases) |
| Who is bound? | The company and all shareholders, including future shareholders | Only those who sign it or later sign a deed of adherence |
| How is it changed? | Special resolution, usually 75% of votes (section 21) | Normally needs the consent of every party |
| Typical content | Share classes, transfer rules, pre-emption rights, directors’ powers, meetings | Reserved matters, deadlock, exit terms, restrictive covenants, dividend policy, confidential commercial terms |
| Main remedy for breach | Enforce the articles against the company or members | Damages, interdict or specific implement against the party in breach |
Many companies start with the model articles of association under the Companies (Model Articles) Regulations 2008. They are a reasonable default for a sole owner, but they say nothing about what happens when shareholders disagree, want to sell their shares or leave the business. Bespoke articles of association and a shareholders’ agreement fill those gaps. Our guide on why companies with several shareholders need tailored articles explains the risks of relying on the model form.
How can a shareholders’ agreement override the articles?
A well drafted shareholders’ agreement will contain a clause saying that, in the event of a conflict between the agreement and the articles, the agreement prevails as between the shareholders of the company. The shareholders also promise to exercise their votes, and any powers they have as directors and shareholders, to amend the articles of the company so they match the agreement.
This works because a shareholders’ agreement is a form of contract between the shareholders, separate from company law rules about the articles. If one shareholder relies on a provision in the company’s articles that the agreement has displaced, the others can enforce the agreement against them. In Scotland that might mean an action for damages, interdict to stop a vote or transfer, or specific implement to force a party to do what they promised.
Example
Two equal shareholders run a limited company. The company articles allow any shareholder to transfer shares to a family member without restriction. The shareholders’ agreement says no shareholding can be transferred without the other shareholder’s consent. If one shareholder decides to transfer their shares to a relative without that consent, the directors may still register the transfer under the articles, but the transferring shareholder is in breach of the agreement and can be held to account by the remaining shareholder.
The limits: what a shareholders’ agreement cannot do
It cannot fetter the company’s statutory powers
Under section 21 of the Companies Act 2006, a company may amend its articles by special resolution. In the House of Lords case of Russell v Northern Bank Development Corporation, a clause where the company itself promised not to change its capital without everyone’s consent was held unenforceable against the company. However, the same promise was valid as an agreement between the shareholders about how they would vote. That is why the company is usually a party only to limited parts of a shareholders’ agreement, and the voting obligations are given by the shareholders personally.
It does not bind people who did not sign it
New shareholders are bound by the articles automatically, but not by the agreement signed by the existing shareholders. The agreement should require any incoming shareholder to sign a deed of adherence before shares are transferred or issued to them, and the articles should back that up.
It cannot override the Companies Act
Some rights cannot be removed by contract. For example, shareholders holding 75% of the votes can still pass a special resolution, and a director can be removed by ordinary resolution under section 168. A minority shareholder also keeps the right to petition the court for unfair prejudice under section 994. A shareholders’ agreement can make those steps a breach of contract, but it cannot make them legally impossible.
It may need to be filed
Section 29 treats an agreement of all the members that would otherwise need a special resolution as affecting the company’s constitution. If a shareholders’ agreement does this, it may have to be filed at Companies House within 15 days, which would make it public. Careful drafting usually avoids this.
Which provisions belong in the company articles and which in the shareholder agreement?
As a rule of thumb, anything that must bind the company, future shareholders or third parties should be in the articles. Anything confidential, personal or commercial should be in the shareholders’ agreement.
- In the articles: share classes and rights, pre-emption rights on share transfer, drag along and tag along, compulsory transfer on leaving, directors’ appointment and quorum.
- In the shareholders’ agreement: reserved matters on the management of the company needing unanimous or majority shareholder consent, business plan, dividend policy, funding commitments, deadlock resolution, restrictive covenants, confidentiality and the terms of any sale of the company.
- In both: good leaver and bad leaver valuation, often set out in the articles with the commercial background in the agreement.
Why it matters for a minority shareholder
A minority shareholder usually has little protection under the company articles of association alone, because the majority can change them by special resolution. A shareholders’ agreement can give them a veto over key decisions, the right to appoint a director, information rights and an agreed route to exit. Our shareholder agreement solicitors regularly act for both majority and minority shareholders.
If shareholders disagree and the documents conflict or are silent, disputes can follow quickly. Our guide to how shareholder disputes are resolved in Scotland explains the options.
Practical checklist to protect your business
- Read your current articles. If you still have model articles, consider adopting bespoke articles.
- Put a shareholders’ agreement in place, with a clear conflict clause and voting undertakings.
- Make sure the two documents are drafted together and use the same definitions.
- Require new shareholders to sign a deed of adherence.
- Review both documents when you bring in investors, issue new shares or plan a sale.
- File any new articles at Companies House within 15 days of the special resolution.
Frequently asked questions
Is a shareholders’ agreement legally binding in Scotland?
Yes. It is a contract governed by Scots law, enforceable by the parties who sign it. It should be properly signed, and many are signed so they are self-proving under the Requirements of Writing (Scotland) Act 1995.
Do I need both a shareholders’ agreement and articles of association?
Every company must have articles. A shareholders’ agreement is optional, but any company with two or more shareholders should have one.
What happens if the articles and the shareholders’ agreement conflict and there is no conflict clause?
The articles still bind the company. Whether the agreement prevails between the shareholders depends on how it is interpreted, which can lead to costly argument. A clear conflict clause avoids this.
Can the majority change the articles to get round a shareholders’ agreement?
Majority shareholders could have the votes to pass a special resolution, but if they have agreed not to, they will be in breach of the shareholders’ agreement and can face a claim or an interdict.
Is a shareholders’ agreement public?
Normally no. It is a private contract between the shareholders, unlike the articles, which are filed at Companies House.
Speak to a corporate solicitor about your shareholder agreement
We draft and review articles of association and shareholders’ agreements for Scottish companies of every size. Call us on 0141 471 9166 or book a free consultation for legal advice tailored to your company.
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About the author
Scott Stevenson, Associate Director, Complete Clarity Solicitors
Scott Stevenson is an Associate Director at Complete Clarity Solicitors in Glasgow, the firm behind Business Lawyer Scotland. He studied at the University of Strathclyde and helps business owners and commercial clients work through practical legal problems. Colleagues value his calm, logical approach under pressure. Before law, Scott played football professionally from the age of 17, and he is now also a FIFA licensed football agent.
This guide reflects Scots law as at November 2026. It is general information, not legal advice for your circumstances.