The shareholders agreement is a contract that seeks to sell shares among shareholders of a company, indicating who has preference in the acquisition, greater voting rights or power of control. This agreement is made based on characteristics such as: quality of the contracting parties and object.
The main important points to consider for the shareholders agreement are:
These three points determine how the agreement should be made. Everything must be included in the contract, including in the case of another new person joining the company.
A shareholders' pact can contain many clauses. They fall into three broad categories:
The shareholders' pact being a simple contract, it has the particularity to be flexible and modifiable by a simple endorsement. However, the unanimity of the signatories must consent to the modification of the pact.
The terms of termination of the shareholders' agreement are specified in the clauses provided for this purpose. The breach of the pact occurs, for example, in the event of a joint exit (transfer of rights at the exit of another partner), exclusion of a partner or forced exit (purchase of shares of minority shareholders). Non-compliance with the pact also leads to the termination of the contract.
The breach of the shareholders' agreement is not as burdensome as the violation of the articles of association. The shareholders' pact is binding only on its signatories and is not enforceable against third parties. The contract may provide for a pecuniary sanction in case of violation of the pact.
The shareholders' agreement is a written contract, under private signature, signed between the main shareholders and investors intervening, for example, during a round table discussion. It aims to provide guarantees to the signatories, which are based on the clauses included in the agreement. The latter is in fact a complement to the company's articles of association. Its main advantage is that it can remain secret if the company is not listed on the financial markets. The shareholders' agreement is in fact a "super-consensus" between the buyer and its financial partners, each party specifying its expectations through power-sharing, exit and protection clauses.
The most common are inalienability and pre-emption clauses. The first prohibits signatories from selling off shares acquired during a given period (generally 2 to 5 years), allowing the stability of the company's capital and power. The second, obliges one of the signatories of the agreement wishing to separate from its shares to notify the other signatories according to a well-defined procedure (registered letter with acknowledgement of receipt for example) so that the latter can exercise their priority right of purchase over the shares.
Non-dilution clauses, preferential right to information clauses, and management agreements are less common in pacts, but can be useful to both the acquirer and investors. The non-dilution clause gives preferential subscription rights during capital increases to minority shareholders, allowing them to keep the same percentage of capital. While company law gives all shareholders a right of information, the privileged right to information clause allows investors to obtain more frequent and detailed information than usual. The documents and the frequency being detailed in the agreement (monthly dashboards, "burn rate,..."). Finally, the management agreement obliges the acquirer to consult its financial partners for extraordinary decisions outside the scope of the normal management act (external growth operations, sale of assets, loans, etc.). The partners have a veto right giving them the possibility to withdraw from the capital in the event of disagreement with the buyer/manager.
The joint exit clause is very common because it protects minority shareholders. Indeed, if the majority purchaser sells his shares to a third party, he must by this clause buy or have bought the shares presented by the minority signatories at the price at which he sells his shares. Thus, minority shareholders do not risk becoming shareholders of an unsuccessful acquirer.
The withdrawal clause allows a signatory to withdraw from the capital if one or more events specified in the agreement occur during the period of validity of the contract (sale of certain assets, departure of a partner,...). The signatories of the agreement are obliged to buy back the shares of the partner wishing to withdraw at a price calculated in advance and specified in the agreement.
The exclusion clause gives the signatories of the agreement the right to exclude one of them if certain events occur or if certain qualities justifying its presence disappear (end of an exclusive partnership, objectives not achieved,...). Signatories must buy back the shares of the excluded person at a price calculated in advance.
The guaranteed exit clause obliges the purchaser to repurchase securities from its partners at the end of a given period. On the agreed date, it must buy back the shares of minority shareholders wishing to sell, at a price calculated in advance (calculation method specified in the agreement).
The "Buy or sell" clause: it allows a shareholder (A) to ask another shareholder (B) to buy back his shares at a price proposed by A. If shareholder B refuses, A may buy back B's shares at the price he has previously proposed. By simplifying, A forces B either to buy back its shares from it or to sell it its shares, hence the name "buy or sell" clause. This clause is infrequent, but it can counteract a bad "cohabitation" between two shareholders.
The collaboration priority clause: it is essentially requested by private equity companies because it gives them a preference over other competing external institutions when carrying out major financial transactions at a later date (bond issue, external growth operation, initial public offering, etc.). However, the signatory is not required to grant an exclusive right to its partner.
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