Deed of Adherence

This template deed of adherence is for when a new shareholder receives shares in a limited company that already has a shareholder agreement in place.

What does a Deed of Adherence do?

The Deed ties the incoming shareholder to the terms of the existing shareholders agreement. You need a deed of adherence in this case, because the new shareholder was not a party to the original contract. Unless you use the deed of adherence, the new shareholder cannot enjoy, or be bound by, the terms of the original shareholders agreement, due to the legal rule called “privity of contract“. (For more on that see Wikipedia.)

Our co-founding lawyer, David, drafted this document, which is in plain English and comes complete with detailed guidance notes. It takes most people no more than 20 minutes to complete the four-page agreement.

There are many details to take care of when you are starting a business. If you are going to incorporate, you will have to have Articles of Association, Shareholders Agreement and possibly a Business Transfer Agreement.

If you have all these things in place and then you want to add another shareholder, you will need a Deed of Adherence. This document will enable you to add this new shareholder to an existing shareholders agreement. We offer this template at a great price, so that you can do it yourself without a huge cost to your business.

When To Use This Deed

One reason that you may have a new shareholder that you need to add could be that a shareholder has sold their shares. This new person would then become the new shareholder and have to be added through the Deed of Adherence.

Although this is one reason you may have to add a shareholder it isn’t the only one. In business, you never know when you might have need for a Deed of Adherence. When you purchase this document from us, you can use it again and again. Our template is downloadable, so it is always there when you want it.

Using our Deed of Adherence Template

You can purchase our template and then download it in Word format to your computer. From there you can edit the template to produce your final document. It comes with a full written guide to completing it. You can preview the guide here.

Please note that we have drafted this document in the format of a Deed. So the parties must have a witness (an independent adult person) see them sign the document.

Before transferring or selling their shares the shareholder you will need to make sure it is permissible under the shareholder agreement. Generally this is not a problem, but you should check this before trying to transfer shares or use this template.

If the person wishing to obtain the shares has permission to hold the shares, then use the Deed of Adherence. The new shareholder must follow the original Shareholders Agreement.

If there is a shareholders agreement, the company won’t register the new shareholder until they sign the Deed of Adherence. So you really must have this document on hand.

As with the rest of our do-it-yourself legal document templates, the Deed of Adherence can easily be customised to suit you.

We only use specialist UK solicitors to draft our templates. So you can be sure they are legal in the UK. The legal information within the template will ensure the right protection for you and your business when:

• transferring shares, and
• accepting new shareholders.

Making business documents easy to buy and use is our commitment to you.

FAQs on the Deed of Adherence

Below we have answered the top questions from the Internet on a deed of adherence.

What is a deed of adherence in the UK?

A deed of adherence is a legal document allowing a new party to join an existing contract. It details the new party’s adherence to the existing terms outlined in the original agreement, ensuring continuity and clarity in the arrangement. In the case of Legalo’s deed of adherence, it is set up for a new shareholder to join a company and sign up to the existing shareholders agreement.

What is in a deed of adherence document?

In a deed of adherence document, you will typically find:

• a statement that the new party joins the existing contract;
• a note that all the existing parties to the contract agree to accept the new party; and
• that the new party agrees to abide by its terms.

The deed of adherence document should not change any terms of the existing contract.

Do you need a deed of adherence?

The need for a deed of adherence depends on your specific situation and the contract in question. For most contracts, you would not have a new party join in later on. However, contracts that relate to businesses, such as companies and partnerships, may last a long time and new owners might join and others may leave from time to time. So, in such cases, you need a deed of adherence for the new party to join the existing arrangements.

Who signs a deed of adherence?

A new party who is joining an existing contract would need to sign a deed of adherence document to acknowledge their acceptance of the outlined terms and conditions, and commit to adhering to them. The existing parties also need to sign the deed of adherence, to show that they agree to the new party joining in their existing arrangements.

What is the difference between a deed of accession and a deed of adherence?

These mean the same thing in the context of a shareholders agreement. In the UK we normally refer to it as a deed of adherence, whereas in Australia and New Zealand (and perhaps elsewhere) they usually call it a deed of accession.

In the UK, a deed of accession often means the agreement under which a buyer of a business agrees to take over and abide by the terms of a UK pension scheme relating to the employees of the business.

What is a letter of adherence?

A letter of adherence is a brief written statement in which a new party expresses their agreement to adhere to the terms and conditions of an existing contract, generally being for a shareholders agreement. In essence it is the same as a deed of adherence.

What is a deed of adherence for a pension scheme?

A deed for adherence (or deed of accession) for a pension scheme can be drawn up when a new employer or participant would like to take over running an existing pension scheme when it has bought the business the pension scheme relates to. The document will outline details such as:

• how contributions will be made;
• how benefits will be accrued; and
• will maintain consistency after the transition.

Does a deed of adherence need to be witnessed?

In the UK, a deed of adherence usually needs independent, adult witnesses to see the parties sign it, in order for it to be legally acceptable. You can use a neutral adult witness for this.

Who can witness a deed of adherence?

A witness to a deed of adherence must be independent and not directly involved with the contract. They need to be of adult age and of sound mind, and must not benefit in any way from the deed to ensure that they are a neutral party. Generally it is preferable that they are not related to any of the parties.

What is the difference between a deed and a contract?

The main difference between a deed and a contract is that a deed is always in writing and is generally more formal, as the law requires that the parties sign it and someone else witnesses it. On the other hand, contracts usually involve a lower level of formality, and can even be merely verbal agreements. Due to this, deeds are more likely to be legally enforceable, as they are more difficult to challenge.

A deed does not require that each party receives something of value for it to be binding on them. A contract, on the other hand, does require that each party receives something of value. Though this does not necessarily mean of equal value.

What features make a deed legally valid?

A legally valid deed typically requires the intention to create a binding legal agreement, competent parties of legal age and mental capacity, and that someone independent witnesses their signatures. The relevant parties must sign it, and deliver with intent for it to take effect.