If you haven’t done so already, please read this article on shareholders’ agreements, as deeds of accession are supplement them.

What is a Deed of Accession?

It is easier to explain what a deed of accession is and why you need a deed of accession with a scenario, rather than trying to describe it.

Deed of Accession Scenario

The company board of directors votes to hire Sara as the company’s new marketing manager. Sarah receives shares as part of her package. The shareholder agreement must be changed to include Sara in the employee share scheme (ESS). To change the shareholder agreement a unanimous shareholder resolution is required. If one shareholder does not vote to change the shareholder agreement, it can effectively prevent Sara from being a shareholder, despite hiring being a board decision.

To prevent situations such as the above, shareholder agreements should require a deed of accession to be entered upon acquiring new shares. This deed binds the new shareholder to the shareholder agreement, without the requiring all shareholders to vote the shareholder agreement.

The deed of accession makes administration a lot easier and more efficient because it alleviates the need to amend the shareholders’ agreement each time new shareholders joins the company.