Deeds of adherence for new shareholders

Q: How might this work in practice?

Illustration only. Asha and Ben each own 50 ordinary shares in a design company and signed a shareholders' agreement in 2021 containing a drag along clause and a bad leaver clause. They agree to sell 10 shares to Carys, a senior designer. The articles say no transfer may be registered unless the transferee has signed a deed of adherence. Carys signs the deed in the form scheduled to the agreement, in front of a witness, joining as a manager shareholder so the leaver clause applies to her. Asha signs on behalf of the existing parties under the authority in the agreement. Ben then signs the stock transfer form, the board approves registration, the register of members is updated and a new share certificate is issued. If Carys leaves within the bad leaver period, the agreement can be enforced against her because she is now a party.

Q: What goes wrong most often?

Registering first and chasing the deed later. Once the transferee is on the register they have little incentive to sign. No witness. A deed signed remotely without an attesting witness may fail as a deed. Using the wrong capacity. An employee who joins as an investor rather than a manager may escape the leaver provisions. Forgetting the outgoing shareholder. A seller who keeps no shares may remain bound by restrictive covenants unless the agreement or a release deals with it. Assuming Companies House needs it. A deed of adherence is a private document and is kept with the company's records; it is not filed. What changes on the public side is the register of members, which section 113 requires every company to keep, once the share transfer is registered. Old agreements with no adherence clause. Without a clause permitting new parties to join by deed, every existing party may need to sign a fresh agreement or a deed of variation.

A deed of adherence is a short document in which a new shareholder agrees to be bound by an existing shareholders’ agreement as if they had signed it originally. It is needed because a shareholders’ agreement is a private contract that binds only its parties, whereas the articles bind every member automatically. Many bespoke articles and agreements make signing one a condition of any share transfer or allotment.

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Why is a new shareholder not bound by the shareholders’ agreement already?

A company has two layers of rules. The articles of association are part of the company’s constitution, and section 33 of the Companies Act 2006 says the constitution binds the company and its members as if each member had covenanted to observe it. Anyone who becomes a member is caught by the articles without signing anything.

A shareholders’ agreement works differently. It is an ordinary contract between the people who signed it. A person who buys shares, inherits them or subscribes for new ones is not a party, so the drag along, tag along, leaver, deadlock, reserved matter and confidentiality clauses do not bind them unless they agree to them. The deed of adherence is how they agree.

The Contracts (Rights of Third Parties) Act 1999 does not solve the problem. Section 1 lets a person who is not a party enforce a term that is expressly for their benefit or purports to confer a benefit on them, provided they are identified by name, as a member of a class or by description. It gives rights to an outsider; it does not impose obligations on them. A new shareholder could therefore claim the benefit of some clauses without being bound by the restrictions, which is exactly what the existing shareholders want to avoid.

What does a deed of adherence usually say?

Most deeds of adherence are two or three pages long and follow a form scheduled to the shareholders’ agreement. Typical provisions are:

a recital of the shareholders’ agreement by date and parties, and of the transfer or allotment that makes the new person a shareholder;
a covenant by the new shareholder, given to every existing party and to the company, to observe and perform the agreement from the date of the deed as if named in it;
a statement of the capacity in which they join, for example as an investor, a manager subject to leaver provisions, or a trustee;
a confirmation that the new shareholder takes the benefit of the agreement as well as the burden;
an address for notices under the agreement;
where an outgoing shareholder is transferring all their shares, a release of that person from future obligations, if the agreement allows it.

Well drafted agreements also authorise one person, often the company or a named director, to sign the deed on behalf of all existing parties, so that a fresh signature from every shareholder is not needed each time someone joins.

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When do the articles require a deed of adherence?

The model articles for private companies do not mention deeds of adherence. Article 26(5) of the model articles simply allows the directors to refuse to register a transfer of a share, returning the instrument of transfer with a notice of refusal. Directors of a company on model articles can use that discretion to insist on a deed before registering, but the requirement comes from the board’s decision rather than an express rule.

Bespoke articles, especially in companies with investors or several family branches, usually go further. Common wording says that the directors must not register a transfer or allot shares to any person who is not already a party to the shareholders’ agreement until that person has executed a deed of adherence. Where the articles say this, a transfer registered without the deed breaches the articles, and a director who allows it may breach the duty in section 171 to act in accordance with the company’s constitution. Read the articles alongside the agreement; see how shareholders’ agreements and articles interact.

If the directors refuse to register a transfer because no deed has been signed, section 771 requires the company to register the transfer or give the transferee notice of refusal with reasons as soon as practicable and in any event within two months after the transfer is lodged. Our guide to directors refusing a share transfer covers that process.

Why is it a deed and not a simple letter?

Executing the document as a deed has two practical advantages. First, it removes any argument about whether the new shareholder gave something in return for the promises. Second, in England and Wales the Limitation Act 1980 allows twelve years to bring an action on a specialty such as a deed (section 8), compared with six years for a simple contract (section 5). Leaver and restrictive covenant clauses can bite many years after someone joins, so the longer period is useful.

How must a deed of adherence be signed?

For an individual in England and Wales, section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 requires the document to make clear on its face that it is intended to be a deed, and to be signed in the presence of a witness who attests the signature, then delivered as a deed. A deed that is signed but not witnessed is not validly executed as a deed.

Where the new shareholder is a company, section 44 of the Companies Act 2006 allows execution by two authorised signatories or by one director in the presence of an attesting witness, and section 46 says a document is executed as a deed if it is duly executed and delivered as a deed. Trustees joining because shares have been settled into a trust each sign in their own names. Scottish companies and individuals follow Scottish rules on execution, because the 1989 Act section applies to England and Wales. Our page on executing documents and deeds has more detail.

Who needs to sign one?

A buyer of existing shares from a current shareholder.
A person subscribing for newly allotted shares, including employees receiving shares under a share scheme.
Trustees of a family trust receiving shares from a founder.
A spouse or child receiving a gift of shares, where the articles do not exempt family transfers from the requirement.
Personal representatives or beneficiaries who become registered holders after a death, if the agreement or articles require it on transmission.

Under model article 27 a person entitled to shares on a death or bankruptcy may choose to become the holder or have the shares transferred, but cannot attend or vote at general meetings until registered as holder. That registration point is usually where the deed of adherence is collected.

How might this work in practice?

Illustration only. Asha and Ben each own 50 ordinary shares in a design company and signed a shareholders’ agreement in 2021 containing a drag along clause and a bad leaver clause. They agree to sell 10 shares to Carys, a senior designer. The articles say no transfer may be registered unless the transferee has signed a deed of adherence. Carys signs the deed in the form scheduled to the agreement, in front of a witness, joining as a manager shareholder so the leaver clause applies to her. Asha signs on behalf of the existing parties under the authority in the agreement. Ben then signs the stock transfer form, the board approves registration, the register of members is updated and a new share certificate is issued. If Carys leaves within the bad leaver period, the agreement can be enforced against her because she is now a party.

What goes wrong most often?

Registering first and chasing the deed later. Once the transferee is on the register they have little incentive to sign.
No witness. A deed signed remotely without an attesting witness may fail as a deed.
Using the wrong capacity. An employee who joins as an investor rather than a manager may escape the leaver provisions.
Forgetting the outgoing shareholder. A seller who keeps no shares may remain bound by restrictive covenants unless the agreement or a release deals with it.
Assuming Companies House needs it. A deed of adherence is a private document and is kept with the company’s records; it is not filed. What changes on the public side is the register of members, which section 113 requires every company to keep, once the share transfer is registered.
Old agreements with no adherence clause. Without a clause permitting new parties to join by deed, every existing party may need to sign a fresh agreement or a deed of variation.

Is a deed of adherence the same thing in an LLP?

The idea is the same. HMRC’s Partnership Manual at PM131440 notes that when a new member joins a limited liability partnership there may be a specific agreement between the individual and the LLP, sometimes called the deed of adherence, and that it forms part of the LLP agreement. HMRC asks for a copy of any deed of adherence when looking at a particular member, which is a reminder that these documents should be kept safely with the company or LLP’s statutory records.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.