… you and others (for example business associates, investors, or business angels) have just founded a new company and wish to govern your relationships as the company’s co-owners
…you (for example as a funder, investor or business angel) are investing in a company and you want to protect your investment by including certain rights, such as the power to participate in important decisions
… you welcome one or more new shareholders in your company and want to define your respective rights to ensure the stability of your ownership structure
A shareholders’ agreement is a legally binding arrangement among the owners of a company (shareholders) that stipulates how the company should be governed and by whom and outlines the shareholders’ rights and obligations.
While it is primarily intended to ensure the fair and equal treatment of all shareholders, it can also provide safeguards for minority shareholders, for example by including a right to be represented at the company’s board of directors or supermajority requirements.
Unlike the company’s articles of association which provides the company’s legal backbone and the content of which is limited by law, a shareholders’ agreement is optional and is based on the parties’ consent. The provisions of the shareholders’ agreement are only binding on its parties and may include rights and obligations that go well beyond the content of the articles of association. For instance, the shareholders may not only include what outside parties may become future shareholders but also provide rights of first refusal or pre-emptive rights (including the exercise price) in case shareholders want to exit the company.
By nature, the shareholders’ agreement serves to govern the relationship between the owners of the company over the long term, and it is therefore critical to consider future developments before making such a commitment. In this context, one aspect that is often overlooked is the need to adapt to changing conditions, which can be difficult if certain decisions or amending the agreement require unanimous consent.
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