M&A: The shareholders' agreement

Marxman Advocaten has a team of specialists in the field of M&A, with Berthe Schellinger, Pieter Verloop and Dennis Kok dedicated to this practice every day! As they like to share their knowledge, a blog on this topic appears on our website every fortnight. Last time, we discussed the purchase agreement; this week, a blog on the shareholders' agreement.

Shareholders of a company usually want to make agreements between themselves. Initially, this is done in the articles of association. In addition to the articles of association, an agreement is often drawn up.

What is a shareholder agreement?

Also called 'shareholdersagreement' or simply 'SHA' is used to make agreements between shareholders about the company's structure and objective. It also regulates relations and agreements between shareholders. It also provides for agreements to avoid conflicts and ambiguities afterwards.

What is regulated in the shareholder agreement?

Like any other agreement, the parties are free to include and leave out whatever they want. It is advisable to at least consider the following provisions:

• Formation of resolutions, voting requirements (simple or special majority) and approval of certain (management) resolutions
• Agreements on the company's operations and information rights for shareholders
• Dividend policy
• Special offer obligations and a tag or drag-along arrangement: this means that when a shareholder sells shares, other shareholders may or must also (co-)sell at this price
• A confidentiality, relationship and non-competition clause
• An arrangement how to deal with disputes between shareholders
• The duration and manner of termination of shareholder agreement

Why is a shareholder agreement needed versus articles of association?

In a company, the articles of association regulate fundamental matters. These include appointment of directors, shareholding requirements and rules for transferring shares. The shareholders' agreement can be concluded alongside the articles of association. This has the following advantages.

• Confidentiality. Articles of association are required by law and must be published with the Chamber of Commerce. Anyone can view these agreements. The shareholders' agreement does not have this obligation. Only those who are parties to the agreement have insight into the agreements made.
• Flexibility. Amending articles of association is a lot of work. First, the AGM has to decide to do so, then the notary has to make the changes and the articles of association have to be made available for inspection at the Chamber of Commerce again. A shareholders' agreement can simply be amended between parties.
• Default and breach of contract. If the SHA is breached, the act is void or voidable. This means that the situation must be reversed, to how it was without the act in question having been performed. By contrast, failure to comply with the shareholders' agreement constitutes breach of contract. The act continues to exist, but is liable to damages, for example. In terms of efficiency, such a solution may be preferable.

Conclusion

A shareholders' agreement is indispensable in today's entrepreneurial practice, but it remains tailor-made. In doing so, it is important to properly align articles of association and the shareholder agreement. A good shareholder agreement ensures clarity between the shareholders and prevents conflicts. If conflicts do arise, the shareholders' agreement provides an enforceable solution.
Are you about to accede to a shareholders' agreement? Or do you and your fellow shareholders need a shareholders' agreement. Marxman Lawyers' specialists will be happy to help you!