With research suggesting that nearly two-thirds of startups fail as a result of co-founders "breaking up", it has never been more important to have the terms of the "marriage" between founders set out from the start. 

The co-founder prenup or, as it is more commonly known, the shareholders’ agreement (or sometimes joint venture or investment agreement), alongside the articles of association, govern the terms of the day-to-day operations of a company. Such agreements cover the division of power as between the shareholders, how to deal with deadlock or disputes, the transfer and allotment of shares, and the circumstances in which shareholders can exit and the agreement will terminate. They will also often set out the relevant framework to agree the business plan of the company, include restrictions on shareholders who leave the business (to protect against poaching of the company’s staff or customers), and the dividend rights of shareholders.

Shareholders’ agreements are even more important to have in situations where co-founders might not have equal shares in (and therefore bargaining power of) the company; a minority shareholder may require stronger protection (for example, a veto over certain decisions) than the Companies Act 2006 would otherwise allow. To ignore such an imbalance of power, and for a dispute to break out later down the line, could lead to a claim of unfair prejudice being brought by the minority shareholder i.e. that the affairs of the company are being conducted in a manner that is unfairly prejudicial to the interests of the shareholders. If successful, such a claim can have wide-ranging consequences for the company and shareholders involved.

Therefore, putting in place a shareholders’ agreement is a sensible idea for all businesses, even if the relationship between co-founders is plain sailing at the start.