A shareholders’ agreement: what, why and how to get started?

Deminor publishes a practical Checklist shareholders’ agreement.

Articles of association with a minimum number of mandatory rules, it is something every company must have by law. However, these articles of association are rarely adapted to the actual situation of a company: they are usually standard texts, they are public and not very flexible to adapt. Nevertheless, shareholders feel the need to make tailor-made agreements regarding their company.  The shareholders’ agreement is the perfect tool for this.

What is a shareholders’ agreement ? 

A shareholders’ agreement is a contract between the shareholders, in which they make arrangements in their capacity of shareholders or co-owners of the company in which they hold shares. These shareholders agreements apply for the duration of the agreement and count as law between the parties, even though the rule is that a shareholders’ agreement may not really deviate or be in conflict with some binding legal provisions or the company’s articles of association.

A shareholders’ agreement is only known between the parties who sign it and can easily be drawn up or modified. This is not the case with articles of association. They are public, leaving no room for confidential arrangements. Articles of association have to be amended by notarial deed and then published. Quite a cumbersome procedure.

A well-run company is constantly evolving. It is not at all inconceivable that certain agreements do not work well or are out of date, that the shareholders change, a new strategy is agreed, etc. You cannot update the articles of association for every change. A shareholders’ agreement is then quickly adapted.

Moreover, various (often minority) shareholders can group together via a shareholders’ agreement to speak as one voice to the other (often majority) shareholder(s).


Responding to change. What can be put in a shareholders’ agreement? 

There is a great deal of freedom to determine which agreements are recorded in a shareholders’ agreement. There are some legal restrictions that apply, but there is as much diversity in clauses as the imagination can allow.

At Deminor we always strive to write a text that is as simple and understandable as possible for everyone.

  • The mission, vision or goals that the shareholders pursue with the company: Is there a common goal between the shareholders, or do they have opposite visions?
  • The rules regarding the acquisition and transfer of shares: who can become a shareholder, how can a shareholder exit or sell shares, what are the rules in case of a bid from a third party, how is the price determined?
  • Agreements on how the company will be run: who will be in charge, how will management supervision be organised, what governance structure will be put in place?
  • How the shareholders interact: when do they meet and how do they decide, how are they represented on the management or supervisory bodies?
  • Agreements on how the capital will be remunerated: what will the dividend policy look like, will other financial aspects be arranged between the parties?
  • Any additional provisions relating to non-competition, confidentiality, settlement of conflicts, etc.


Food for thought. How do you start drafting a shareholders’ agreement?

People often ask if there is no standard shareholders’ agreement available. It can’ t be that difficult, so we can do it ourselves as shareholders?

However, starting with a legal text is the wrong approach. Shareholders who proceed in that way forget the most important phase: the questioning of the shareholders, or the preceding reflection phase: what do the shareholders still want to do together, what are their main complaints, what are the subjects they consider important or not, and what are the rules they want to lay down, with what priorities? To what extent is there a consensus on these various topics or are there very different views?

Deminor guides the shareholders from A to Z, from the concept phase to the final signature.

Step 1: Analysis and taking a picture of the existing structure and bodies, and of the rules already in force
Step 2: Drafting of a questionnaire with the topics to be discussed
Step 3: Individual or group interviews with the shareholders
Step 4: Reaching a consensus on the topics at stake
Step 5: Drafting and signing of the shareholders' agreement

The practical Deminor Checklist Shareholders’ Agreement, with the most common topics when drafting a shareholders’ agreement, offers an excellent starting point.


The traps. What not to do when drafting a shareholders’ agreement?

Starting with a legal text is not a great option. First seek consensus on the major principles and themes, then draft a text or have it drafted.

Avoid making agreements that could lead to a blocking situation: always ensure that a way out is possible, whether a conflict-avoiding method is provided by an external expert, a mediator or certain exit clauses whereby the parties separate when the cooperation no longer appears to be possible.

Do not make it too complex, so that not only the current shareholders but also their successors understand what they are signing.

Never forget the emotional and very personal aspects in the discussion. There is no point in not including certain themes or topics that are sensitive in the discussions. They are guaranteed to come back on the table.

Don’t rush things. Take time for reflection and dialogue.

Make the shareholders’ agreement for a sufficiently long period, but also provide for the possibility of adjusting the rules in the medium term with a sufficient majority.

Finally, another obvious rule of thumb: a shareholders’ agreement must always be drawn up with the company’s interests in mind, but at the same time, a company cannot grow sustainably without happy shareholders with the right mutual agreements.

Would you like more information on the drafting of a shareholders’ agreement? Feel free to contact Bernard Thuysbaert for an informal talk or leave your details below and download our Deminor Checklist for Shareholders’ Agreement:

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