Shareholders' Agreement
- The first question we ask is: Have the owners entered into a shareholders' agreement?
- When to Enter into?
We often encounter cases in our work where partners turn to lawyers to resolve a corporate conflict that has arisen.
The reasons for such a conflict may include different visions for the future of the company, disagreements on development and strategic direction, profit distribution, investments in new projects, top management candidates, and more. Conflicts can also arise if one of the owners believes that they are making a greater contribution to the business than others, but are not receiving adequate rewards or influence.
Let's add personal grievances and emotional reactions to this picture, which can intensify and complicate the conflict, making it difficult to resolve.
The first question we ask is: Have the owners entered into a shareholders' agreement?
And, it must be admitted that in 90% of cases the answer is negative. Let's explore what a shareholders' agreement is and why it is so essential for minimizing corporate conflicts.
A Shareholders' Agreement (SHA) is a legal document that regulates the relationships between partners in business and defines their rights and obligations. This document is not public unlike the company's Articles of Association.
When to Enter into?
It is best to negotiate a shareholders' agreement at the very beginning of your history with a partner. Since at the beginning of the relationship, parties are maximally loyal to each other, it is easier and more constructive to discuss negative scenarios (thinking that they surely won't face such scenarios). However, a shareholder's agreement can be entered into at any stage of the partnership.
In the following posts, we will gradually focus on the provisions that are typically included in a shareholders' agreement (goals and objectives of the partnership, roles and contributions of partners, profit and loss distribution, management and decision-making, conditions for exiting and admitting new partners, attracting investments, resolving disputes between partners, duration and termination of the partnership, and more).
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