Everything about the shareholders’ agreement (SHA)

The only obligation of the shareholder provided for by law is the payment of the issue amount of the shares subscribed by him. Neither the law nor the articles of association may impose further obligations on a shareholder. In order to bind important shareholders to the company and to avoid undesired sales of shares, SHA are often concluded in practice.

Shareholder’s obligation to pay

A joint-stock company is a corporation. In contrast to general partnerships, the focus of corporate activity is not on the personal relationship with the company, but on the pursuit of profit. The result of this capital-oriented purpose is that the shareholder’s only obligation is to pay the issue price of the subscribed shares. In principle, neither the law nor the articles of association may impose further obligations on the shareholder. However, in order to be able to impose further obligations on the shareholders, in practice SHAs are often concluded.

Extensive regulatory freedom

An SHA is a contract under private law that is not regulated by law. The purpose of the shareholders’ agreement is to bind the shareholder more strongly to the company. Typical subjects of a shareholders’ agreement include the relationship between the shareholders and the company (fiduciary duty, non-competition clause, duty of confidentiality, etc.) and the transfer of shares (pre-emption and purchase right, co-sale right, co-sale obligation, etc.). Also common are specifications regarding the financing of the company (shareholder loans, dividend policy, etc.) and the management of the company (quorums for passing resolutions, binding voting rights, etc.). A violation of the shareholders’ agreement is usually punished with a conventional penalty.

Shareholders’ agreement: The name is deceptive

In practice, the question of the relationship between the shareholders’ agreement and other company regulations is often discussed. Since the articles of association are available in the commercial register and can be invoked against third parties, they take precedence over the shareholders’ agreement. Contrary to what the name implies, a shareholders’ agreement does not necessarily impose binding obligations on shareholders. If, for example, a shareholder votes against the contractual agreement at the general meeting, the vote still remains valid. However, the shareholder will probably have to pay a penalty for his breach of the shareholders’ agreement.

Practical tips

A public limited company is usually established for an indefinite period of time, which is why a limitation of the term of the shareholders’ agreement does not appear to make sense. However, such “perpetual contracts” are inadmissible as they violate the prohibition of excessive binding (Art. 27 para. 2 CC). For this reason, shareholders’ agreements are usually concluded for a period of ten to fifteen years, whereby the right to renew is reserved if no notice of termination is given.

As far as the concrete form of the shareholders’ agreement is concerned, countless templates can be found on the internet. However, caution is advised when using these templates, as the SHA should be tailored to each company. A randomly thrown together SHA creates more conflicts than it solves. In case of doubt, it is therefore advisable to consult a lawyer before concluding the contract.