Shareholders’ agreements are agreements of a private nature that regulate the relations between the members of a company. They are essential to establish the rules of the game in any company, especially in startups and growing companies.

In this article, we will explore the different types of Shareholders Agreements, their importance, and how they can be drawn up.

Types of Shareholders Agreements

Although in the background it is still a denomination that defines a certain moment in the life of the company, we could say that there are different types of Shareholders Agreements, each designed for a specific stage of the development of a company:

1. Shareholders Agreement – Seed Stage: In the initial phase of a company, it is crucial to establish the rules of the game. This pact regulates how they work together, identifies the founders, describes roles or functions, and establishes how the distribution of equity will be carried out.

2.Shareholders Agreement – Early Stage: After a few months working on a minimum viable product (MVP), the need to sign a Shareholders Agreement arises. This agreement regulates the relations of the shareholders and the functioning of the company.

3. Shareholders Agreement with Accelerator / Incubator: When a team of entrepreneurs is admitted to an acceleration or incubation program, a Shareholders Agreement is signed that regulates the relationship between the team and the accelerator or incubator.

4. Shareholders Agreement with Mentors: In some cases, a mentor may receive a minority percentage in society in exchange for their mentoring services.

5. Shareholders Agreement with Crowdfunding: When seeking financing through crowdfunding platforms, a shareholder’ agreement is established that regulates how these small investors will enter society.

6. Shareholders Agreement – Growth Stage: When a startup makes a round of financing with a VC (investment fund), a new Shareholders Agreement is negotiated that puts a lot of emphasis on control and economic clauses.

Importance of Shareholders Agreements

As already anticipated, Shareholders Agreements are essential to regulate the life of society. They help to avoid problems arising from the frequent tensions that usually occur between the shareholders and establish rules to resolve any controversy or conflict. In addition, they provide legal certainty to the agreements reached by the parties, with the necessary mechanisms to force compliance with the agreement or give rise to compensation for non-compliance.

Important Agreements in Shareholders Agreements

Although there is no generic model for a shareholders’ agreement that regulates its most important clasues, since the needs of the shareholders of different companies may vary, we could say that there are certain clauses that are usually incorporated into this type of documents because they are fundamental in any shareholders’ agreement.

First, we will make a distinction by major concepts of agreements. Thus, by categories, we would have:

Control Clauses

Control clauses regulate how decisions are made within the company. These clauses may address aspects such as the structure of the company’s administrative body, the majorities required to make decisions, the right of veto of the shareholders, and the creation of a Management Committee to supervise and limit to a single director.

Protection Clauses

Protection clauses are designed to safeguard the assets of the company and its shareholders. These clauses may include terms of tenure for worker shareholders, non-compete clauses during and after the contractual relationship, and details about the contributions and responsibilities of each partner.

Confidentiality Clauses

The confidentiality clause ensures that employees do not disclose sensitive information about the company, both during their employment and after its termination. To ensure compliance with these clauses, it is common to include penalty clauses, which may involve economic sanctions or the forced sale of shares.

Exit Clauses

Exit clauses regulate how and under what conditions a partner can leave the project. These clauses may include the pre-emptive right of acquisition, which gives existing shareholders the first option to buy the shares of a departing partner; the carry-over right, which allows the majority shareholder to force minority shareholders to sell if he receives a purchase offer from the majority of the company; the right of accompaniment, which allows minority shareholders to sell under the same conditions as the majority shareholder if the majority shareholder sells to a third party; and preferential liquidation in case of sale or liquidation of the project, which ensures that investors are the first to collect.

Most important clauses of the Partners’ Agreement

Going into more detail, of the clauses that can be part of the shareholders’ agreement, some of the most important are detailed:

1. Provision of Services: This clause establishes the roles and responsibilities of each partner in the company. It is important that each partner understands and accepts their obligations to avoid future conflicts.

2. Share Transfer Regime: This clause regulates how the company’s shares can be sold or transferred. It may include first offer rights, towing rights and accompanying rights.

3. Regime of Adoption of Agreements: This clause establishes the rules for decision-making in the company. It can include majorities needed to make certain decisions and decisions that require unanimous approval from shareholders.

4. Ancillary Benefits: This clause may include any additional obligations that the shareholders agree, such as the obligation to work full-time in the company.

5. Forms of Administration of the Company: This clause establishes how the company will be managed. It may include the appointment of a single director, two joint directors or a board of directors, whose members are elected by certain members, and their responsibilities and powers.

6. Unlock Clauses: These clauses are used to resolve blocking situations in decision-making. They can include mechanisms such as mediation, arbitration or forced sale of shares to prevent the company from being forced to close.

7. Good Leaver and Bad Leaver Clauses: These clauses establish the consequences of the departure of a shareholder from the company. A “Good Leaver” is a shareholder who leaves on good terms, and usually in exchange for generous economic compensation or at least to the market, while a “Bad Leaver” is a shareholder who leaves on bad terms, which usually implies the loss of his participation at face value as a penalty for some type of breach.