Date published: 08 April 2026 | Author: Nina Rossi

A company’s constitution and its shareholders' agreement each play a different role in how a business is run. Many owners only look at these documents when something goes wrong, but recent guidance shows why they matter long before a dispute arises. 

A constitution sets the basic rules for how the company operates. It covers topics such as appointing directors, running meetings, and the rights attached to different classes of shares. Most small companies use a generic constitution that was issued when the company was first set up, which means it may not reflect how the owners actually want the business to run.

A shareholders' agreement is different. It is a private contract between the owners that addresses practical issues such as how decisions are made, what happens if someone wants to sell their shares, how disputes are resolved, and what occurs if a shareholder dies, becomes incapacitated, or breaches their obligations. It gives owners far more control and protection than relying on the Constitution alone. 

What business owners should think about

• Whether your constitution is generic or tailored to your business
• Whether your shareholders' agreement reflects your current ownership structure
• Whether you have clear rules for selling shares, bringing in new investors or removing a director
• Whether your documents protect you if a shareholder becomes uncooperative or exits unexpectedly
• Whether both documents work together rather than contradict each other

You’re in control when you understand your legal position. Contact Rossi Law today to get the clarity and advice you need to move forward.