Corporate
Ten tips for a shareholders agreement that prevents litigation
A shareholders agreement is not for the day it is signed. It is for the day two shareholders stop agreeing and neither wants to sell. These ten clauses keep that day out of court.
- 01
Who decides what
Matters reserved to the shareholders meeting and the majorities required. Without this, the majority shareholder decides everything and the minority has nothing.
- 02
Share valuation
A formula or an expert appointed in advance. A valuation agreed calmly is the only one that does not become the next dispute.
- 03
Right of first refusal
If a shareholder sells, the others may buy first and on what terms. It keeps unwanted third parties out.
- 04
Drag-along right
If the majority sells, it can drag the minority on the same terms. It is what makes the company sellable.
- 05
Deadlock and tie-breaking
What happens on a tie: casting vote, mandatory mediation or a buy-out mechanism. A deadlock with no rule paralyses the company.
- 06
Periodic information
Financial statements and reports with a deadline and format. Lack of information is the first sign of a corporate dispute.
- 07
Dividend policy
What percentage is distributed and when it is retained. Without a policy, every distribution becomes a power dispute.
- 08
Competition and conflicts of interest
What a shareholder may do outside the company and how a conflict is disclosed. Unfair competition between shareholders is more common than it appears.
- 09
Grounds for exclusion
Grounds and procedure to exclude a shareholder. An exclusion without procedure is annulled.
- 10
Forum and governing law
Courts or arbitration, with seat and rules defined. This clause decides what it costs to argue everything above.
If the company already exists and so does the dispute, the first step is to review the articles and the agreement and see which mechanism is available: negotiation, purchase of the stake or challenge to a decision.
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