Questions about shareholders’ agreements
Questions about shareholders’ agreements
What is a shareholder agreement for?
It can regulate voting arrangements, transfer rights and dispute resolution between the parties. The articles of association and mandatory company law remain independent. Not every contractual undertaking can be structured as a shareholder obligation under the articles.
What applies without a shareholders’ agreement?
The law, articles of association and any other agreements determine the rights. Desired pre-emption or tag-along rights do not arise automatically. The obligation to contribute capital concerns the company and is not simply an obligation between shareholders.
Can the agreement be concluded before incorporation?
Yes, future shareholders can enter into contractual arrangements. Conditions, subsequent participation and accession by further individuals should be regulated. A company that does not yet exist does not thereby automatically become a contracting party.
What happens if the agreement is breached?
Contractual claims for performance, damages or penalties may arise. The corporate-law validity of a vote or transfer must be examined separately. A court may reduce a contractual penalty if it is excessive.
Complex questions from practice
How can deadlock between two equally invested shareholders be resolved contractually?
Deadlock triggers, escalation, valuation and exit should be clearly agreed. A contractual mechanism must fit the parties’ financial capacity. It does not replace the statutory powers of corporate bodies.
Describe the decisions that can cause deadlock and provide a staged process. Mediation, purchase offers and exit rights must be workable in terms of timing and organisation. For purchase mechanisms, it is especially important whether both parties could finance a takeover. Otherwise, a formally equal rule may have very different economic effects.
When do sale obligations under a shareholders’ agreement also bind a shareholder’s heirs?
Succession to the agreement, accession, the articles of association and inheritance law must be considered together. Automatic transfer of all personal commitments must not be assumed. Succession and the purchase price should be expressly regulated.
Examine which rights and duties are inheritable and which are personal to a shareholder. Any accession or acquisition procedure should be coordinated with the articles of association and estate planning. Valuation, payment and exercise periods also matter to prevent a death from leaving ownership unresolved.
Under what conditions can a contractual penalty and additional damages be claimed?
The contract and statutory rules determine the relationship between remedies and the burden of proof. Multiple claims must not be combined without examination. An excessive contractual penalty remains subject to review even where clearly agreed.
Clarify which breach triggers the contractual penalty and whether it is intended to be claimed alongside performance or other remedies. Proof, fault and the statutory possibility of reduction may be relevant. Clear drafting reduces later disputes over whether an amount is a penalty or agreed compensation.
How do tag-along rights protect shareholders when shares are transferred to a related party?
Covered transfers, exceptions and circumvention scenarios must be precisely defined. The price and ancillary benefits must be considered together. The share price alone may not fully reflect the economic consideration.
Tag-along rights should appropriately cover indirect transfers and economically comparable transactions. In a sale to a related party, additional agreements may affect the true consideration. The purchase price, payment terms, ancillary benefits and information rights must therefore all be considered.