Shareholders Agreement Template for Startups: What UAE and Saudi Founders Need That a US Template Doesn't Have

A shareholders agreement is the private contract between a company's shareholders that fills the gaps left by its public constitutional documents — vesting, exit rights, minority protection, deadlock. In the US, most startups treat this as a Delaware stockholders agreement problem with well-known clauses. In the UAE and Saudi Arabia, the constitutional documents themselves work differently, so a shareholders agreement has to do more work: mainland UAE company law is comparatively rigid and gives shareholders little by default, while Saudi Arabia's 2023 Companies Law only just started letting founders write things like drag-along and tag-along into their own documents. Downloading a US or UK template and swapping in a Dubai address doesn't fix either problem.

What a shareholders agreement actually is, and what it isn't

Every UAE or Saudi company has a memorandum of association (MOA) or articles of association (AOA) — in a UAE mainland LLC these are usually one filed document. It's public: it states the company's name, objectives, capital, and basic governance structure, and it's what the licensing authority checks against. A shareholders agreement (SHA) is a separate, private contract between the shareholders. Nobody files it with a government authority, nobody outside the company can read it, and it can add rights and restrictions the constitutional documents don't cover — but it can't contradict them. If your AOA says one thing about share transfers and your SHA says another, the AOA controls the parts a court or registrar will actually check.

That split matters because founders often assume the AOA is "the legal document" and the SHA is optional paperwork. It's the reverse in practice. The AOA is usually the minimum a lawyer files to get the company registered, often close to a standard-form template the authority itself provides. The SHA is where the actual deal lives: who vests what, who can block what, who gets bought out and how.

Why mainland UAE and Saudi Arabia aren't a Delaware problem with different letterhead

A Delaware certificate of incorporation is deliberately thin — Delaware General Corporation Law assumes almost everything meaningful (vesting, ROFR, board composition, protective provisions) gets negotiated into a stockholders agreement and a certificate of designations for preferred stock. A generic template built for that system assumes the constitutional documents are silent and the contract does all the work.

Mainland UAE doesn't work that way. Company law gives LLC partners a narrower set of default rights, and anything a founder wants beyond that baseline — expanded transfer restrictions, tailored voting thresholds, tie-breaking mechanisms — has to be written in, either into the AOA itself or a supplementary SHA. Move into a free zone like ADGM or DIFC, both common-law jurisdictions we've covered before in the context of SAFE agreements in the UAE, and the picture is closer to Delaware: stronger statutory default protections, including remedies for unfairly prejudicial conduct and the ability to issue genuinely different share classes. Know which of the three regimes — mainland, DIFC, or ADGM — your company sits in before assuming a template written for one applies to another.

Saudi Arabia moved in the same direction, later. The Companies Law that took effect on 19 January 2023 was the first Saudi statute to explicitly recognize drag-along and tag-along rights, letting shareholders representing 90% or more of a company's equity require the rest to sell alongside them on the same terms, with tag-along giving minority holders the mirror right to ride along on a majority's exit. Before that law, a Saudi shareholders agreement could try to create the same outcome by contract, but had no statutory backing if a party simply refused to comply. Existing companies had a two-year grace period to bring their documents into line, which closed in January 2025 — if your company predates the new law and nobody has touched its constitutional documents since, that's worth checking now, not at your next round.

The clauses a US template gets wrong for this region

Vesting. A US restricted stock purchase agreement relies on a legal fiction — the shares are issued up front, but unvested shares are subject to the company's right to repurchase them at cost if the holder leaves early. That depends on concepts (restricted stock, a repurchase option baked into the security itself) that don't map cleanly onto every regional company law. Where shares are simply issued and owned once paid for, vesting has to be enforced entirely through the SHA's own contractual machinery — a call option triggered by departure, at a price set in the agreement. Copy the US clause verbatim and you may have written an unenforceable forfeiture provision instead of a working buyback right.

Reserved matters. This is the single most important minority-protection tool in a startup SHA, and it's often thinner in a template than it should be for a foreign or minority investor in this region. Reserved matters are the decisions — amending the constitutional documents, issuing new shares, taking on debt past a threshold, approving a merger, entering related-party transactions — that need a specific shareholder vote, not just ordinary board sign-off. A template built around Delaware norms often assumes protective provisions live in a certificate of designations tied to a preferred stock class. Outside that system, reserved matters need to be spelled out directly in the SHA (or the AOA, where Saudi law now allows it) with an explicit voting threshold, because there's no separate security class quietly doing that work for you.

Drag-along and tag-along. As covered above, Saudi Arabia only recognized these mechanisms by statute from January 2023, and UAE mainland law gives them no statutory backing at all — they exist only if the SHA (or, since the new Saudi law, the AOA) creates them. A template that assumes these clauses are self-evidently enforceable everywhere is assuming a US or UK legal backdrop that doesn't exist here by default.

Exit and transfer restrictions. We've written before about how right of first refusal works differently outside Delaware — mainland UAE law imposes a statutory pre-emption right on LLC transfers whether or not anyone drafted one, and Saudi Arabia lets founders write ROFR directly into the AOA rather than a side contract most of the cap table never signs. A regional SHA needs to state clearly which regime it's layering on top of, not assume it's creating a right from a blank slate.

What every SHA should cover, jurisdiction aside

Strip out the region-specific parts and every SHA worth signing answers the same questions: who owns what and on what vesting schedule; what happens if a shareholder wants to sell (ROFR, tag-along); what happens if the majority wants to sell (drag-along); which decisions need more than a simple majority (reserved matters); how a deadlock between equal co-founders gets broken; who owns the IP the company runs on; and what triggers a mandatory buyback — departure, death, insolvency, competing venture. A generic US template gets that list roughly right. What it gets wrong, for a UAE or Saudi company, is assuming each mechanism is either automatically enforceable or has no statutory equivalent worth checking — when the honest answer, for both jurisdictions, is "it depends which one, and it changed recently."

Where this fits into the rest of your governance stack

A shareholders agreement is a negotiated legal document, not something to generate from a form and skip a lawyer on — Govy doesn't try to auto-generate one. What Govy does track, once your lawyer has drafted it, are the mechanisms the SHA creates: shareholder registry and ROFR tracked against the same ledger a transfer actually happens on, general assembly quorum and voting thresholds that mirror your reserved-matters list, and jurisdiction-aware founders agreement and board/shareholder resolution templates that flow straight into e-sign. If you're building the founding-stage document that later becomes your SHA's starting point, see what a Saudi founders agreement needs to cover first.

The mistake isn't skipping a shareholders agreement. It's signing one built for a legal system you're not incorporated in. See how Govy tracks the governance a properly drafted SHA creates at govy.tech.

FAQ

What is the difference between a shareholders agreement and articles of association?

The articles of association (or memorandum of association, often one filed document in a UAE LLC) is a public, statutory document that governs the company's relationship with the outside world and its basic internal structure. A shareholders agreement is a private contract between the shareholders themselves, confidential and unfiled, that layers additional rights and restrictions on top — vesting, ROFR, drag-along, reserved matters — without becoming public record. It has to be consistent with the articles; it can't override them.

Do I need a shareholders agreement if I already have a founders agreement?

They usually cover different scopes. A founders agreement is typically signed at formation between the founders only, covering roles, IP assignment, and initial vesting. A shareholders agreement covers everyone who holds shares — founders, investors, and anyone else on the cap table — and keeps governing the company long after the founding team has changed. Most startups need both, and the founders agreement's vesting and IP terms should carry forward into the shareholders agreement once outside investors join.

Is a shareholders agreement legally required in the UAE or Saudi Arabia?

No, in neither jurisdiction is a shareholders agreement mandatory. What's mandatory is the memorandum or articles of association filed with the relevant authority. A shareholders agreement is optional but close to essential in practice, because mainland UAE and Saudi constitutional documents alone leave real gaps — around minority protection, exit rights, and deadlock — that founders and investors have to close themselves.

What are reserved matters in a shareholders agreement?

Reserved matters are a list of major company decisions — amending the constitutional documents, issuing new shares, taking on debt above a threshold, approving a merger, related-party transactions — that require a specific shareholder or investor vote beyond ordinary board approval. They're the main tool a minority shareholder has to stop the majority from steamrolling a decision that changes what they actually own or control, and they matter more than a ROFR or drag-along clause in day-to-day governance.

Can drag-along and tag-along rights be enforced under Saudi law?

Yes, since the Companies Law that took effect on 19 January 2023. It was the first time Saudi law explicitly recognized drag-along and tag-along mechanisms, and it lets shareholders holding 90% or more of the company require the remaining shareholders to sell alongside them on the same terms — with tag-along giving minority holders the mirror right to join a majority sale. Before that law, founders had to rely on contract alone, with no statutory backing if a party refused to comply.