In addition to describing the characteristics of a shareholder pact, we also have a simple model of shareholder contract available for download. Investors can postpone discussion of a shareholder pact in order to stick to the important role of creating the company. Although they may intend to return later, when there is more time, the opportunity cannot arise and something else is always a priority. Even if they resume it later, shareholder expectations and feelings about the transaction may have diverged by then, making it more difficult for them to accept the terms to be included in the shareholders` pact. In the case of sensitive agreements, a private agreement is the best way to register the agreement. Of course, you can add these and other provisions to the presentation agreement, but it may be worth talking with one of our experts to determine if they are necessary for your business and how they work in practice. The reason for the will of a shareholders` pact will generally be to assert veto rights: thus, contrary to the common law, the powers of the board of directors (or shareholders to exercise their own power – see below) are reduced. A shareholders` pact can create a mechanism that, when a shareholder wishes to sell its shares, effectively confers on other shareholders or the company (as the case may be) a «pre-pro- right» of those shares. If you have more than two shareholders, sometimes several shareholders ally themselves against a minority shareholder and make decisions with which they disagree. A shareholder pact can protect all parties by ensuring that certain important decisions can only be taken unanimously. When you start a business, you often wonder if it should have a shareholder contract.
Remember, a right to buy back is an appeal option in favour of the majority shareholder: he does not need to buy if he does not like the rating. This situation is very different from a put option which is in fact the remedy of a minority shareholder found unjustly aggrieved by a court. With a put option, the majority shareholder must buy: an unfortunate position to be ahead of all if the valuation is not to the buyer`s liking or he does not have the money. Another concern is where a minority shareholder could transfer its shares to anyone. This could create problems for other shareholders, especially if the sale is made to a competitor or someone else who does not want to involve other shareholders in the company. But conversely, forcing a disgruntled shareholder to stay can create more problems than having a new unknown shareholder interested in the success of the company. All shareholders must agree to make business prosper. To overcome these problems, shareholder agreements often contain rules on share sales and transfers – to whom shares can be transferred, under what conditions and at what price. Historically, the articles have generally provided for an assessment by the statutory auditor, although the well-informed minority shareholder has attempted to secure the valuation by an independent accountant.
One of the most important areas is the rules that apply when a shareholder wants to transfer his shares and what can happen to them if the shareholder dies.