The shareholders’ agreement is one of the most important contracts in the Dutch BV (limited liability company). This contract determines the most important agreements between the shareholders of a company. Among other things, this contract makes clear what happens when one shareholder wants to leave the company. It also determines what happens when the shareholders can not agree on something and in which way they should vote. The shareholders agreement is not relevant if you are the sole shareholder in your business.
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If your company has more than one shareholder, we strongly recommend you to draft a shareholders agreement. Where the deed of incorporation determines the relationship between the company and the shareholders, the shareholders’ agreement is a private agreement between the shareholders themselves. Although this agreement covers a wide range of issues, there are a few topics that are extra worthwhile mentioning.
First of all, the shareholders agreement states who is responsible for the day-to-day management of the company. You also determine for which decisions management first requires shareholders’ approval. Furthermore, decisions are taken democratically in the shareholders’ meeting (AGM). However, some decisions are so important that a large majority is needed. In this contract you determine for which decisions this is necessary.
In practice this is a complicated matter. Especially with two shareholders it is easier than with more shareholders to end up in this so-called deadlock. The general principle is that two partners should be able to work things out. If one of the parties is unwilling in doing so, it is hard to change this mindset in an agreement. In fact, it could even lead to a more tense relationship. In certain instances, the bad leaver clause will be activated. What you could do is add a mediation-clause that will force you to solve a dispute with the help of a professional mediator instead of immediately going to court. That would look something like this:
Disputes relating to the agreement signed by the parties or from contracts that build on it, will first be tried to be resolved by the Shareholders. Once a dispute arises, Shareholders will do their utmost to resolve the dispute themselves. Shareholders will receive three attempts to reconcile within 90 days. If it has proven impossible to resolve the matter in question in this way, the matter will be settled using a certified mediator chosen with the approval of both Shareholders. If it has proven impossible to resolve the matter in question through mediation, the dispute shall be submitted to the competent court in the district where the Company has its registered office.
Including a bad leaver clause obliges a shareholder to offer his or her shares to the other shareholder(s) in case of a certain situation. This arrangement is designed to make sure that if one of the shareholders who is also an employee or manager in the company does something “bad” and is fired from his position (for example, he uses the company account for private expenses without informing the other shareholders), he is also forced to sell his shares. We generally advise founders to include the bad leaver clause.
If a shareholder wants to sell his shares, he must first offer them for sale to the other shareholders. These shareholders are not suddenly confronted with an unknown new shareholder. This protects all shareholders in the same way.
The tag along arrangement protects a shareholder with a relatively small interest and includes the following. If a party wishes to sell its shares to someone who is not a party to this shareholder agreement, the other shareholders have the right to also sell their shares to this party at the same price. If the interested party does not want to buy other shares, everyone can participate pro rata in the sale. Someone who holds 30% of the shares may therefore sell 30% of the number of shares that the buyer wants.
The drag along arrangement protects shareholders with a major interest. If a shareholder with a large interest wants to sell his shares to a party who indicates that he wants to have all shares, all shareholders must co-sell their shares if the offer is accepted at the meeting of shareholders. The other shareholders may at that time also choose to buy all the shares themselves for that price instead.
To be clear, a shareholder’s agreement can be signed and formalised after the incorporation as well. It is simply an agreement between the shareholders, but it is not mandatory to have it ready before the registration of incorporation of the company. However, it is important to let us know pre-incorporation that you will like to have one. This will be noted in the deed, and the deed of incorporation will refer to a shareholders agreement.
A vesting scheme is a fairly common way to hand out shares gradually instead of immediately, for example to employees. If your goal is to eventually reward your employee with 15 percent of the shares, but you want to make this dependent on performance, a vesting scheme can be an excellent tool. For example, the employee/shareholder will get 5 percent of the shares immediately and then the other 10 will be granted during the first 18 months upon reaching certain sales targets.
Art. X – Reverse Vesting
a. All Shares held by each of the Shareholders are subject to the following reverse vesting provisions and the conditional transfer of title from the respective shareholder to the company.
b. Starting on Date X all shareholders own the amount and proportion of shares as stated in article X of this agreement.
c. In the event that Shareholder X does not achieve his sales targets he will have to transfer shares back to the Company, as set out in Annex X. The Company hereby accepts such sale and transfer.
Forcing a shareholder to selling at nominal value is the most harsh sanction, because the nominal value of shares is usually almost nothing. This is a severe punishment which seems attractive when a shareholder has really crossed the line. However, keep in mind that the road to pushing out a fellow shareholder can be long and messy. Making the shareholder sell his or her shares at the current market value is therefore a much softer approach. Therefore it is the approach we usually recommend to include in the shareholders agreement. Finally, there are also scenarios possible where you want the shareholder to hold on to his or her shares not matter what. For example, when this shareholder has helped built-up the company and, no matter what, you want them to profit what they have worked on.
After you have fulfilled the checkout process, we will send you a form where you will out a few details about yourself, your company and your company structure. Once this has been filled out we will start working on your Shareholders agreement. This takes on average 1-2 working days.
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