Shareholders' agreement

 4 reasons why you need a shareholder agreement

1. It is the legal blueprint of the company. It is the starting point for discussion with new shareholders or investors.

2. You and your fellow shareholders are forced by the drafting process to think about a number of issues in advance. This prevents future conflicts.

3. A shareholders' agreement is flexible and you can easily amend it. Adjusting your articles of association is not easy, because you will have to go to the notary first.

4. Unlike the articles of association, the agreements you make in the shareholders' agreement are confidential.  

Other designations

English is increasingly becoming the working language in the start-up scene, where a shareholders' agreement is often referred to simply as a 'shareholders agreement' or 'SHA'.

What does it contain?

Drafting a shareholders' agreement sets out the important agreements about the company and the cooperation between the shareholders. First, the distribution of shares is described, so that everyone knows clearly who has what share in the business. Next, the business itself is briefly described, as is the composition of the board, so that everyone involved knows who plays which role and which decisions must be taken by the board (the board reserved matters).

It is also important to lay down rules for the general meeting of shareholders and approval procedures for certain decisions of both the board and the shareholders. The agreement also contains a lock-up arrangement, which prevents shareholders from simply selling their shares in the initial phase. Furthermore, agreements are made on the budget and dividend policy, so that there is clarity on finances and profit distributions.

To ensure smooth cooperation, agreements are also laid down for situations such as the offering of shares (the offering arrangement), a deadlock arrangement for if a deadlock arises, and tag-along and drag-along arrangements, which deal with selling shares if someone wants to transfer their stake.

In addition, there are agreements on what happens if a shareholder leaves: this determines what happens if a good leaver (someone who leaves on good terms), early leaver (someone who leaves early) or bad leaver (someone who leaves under negative circumstances) leaves the company.

Finally, issues such as non-competition, intellectual property, confidentiality, and conflict resolution are laid down to ensure that everyone follows the same rules and to prevent future conflicts. By laying down these comprehensive agreements, risks are mitigated and a solid foundation is laid for a successful collaboration.