Shareholders' agreement: which arrangements are important?

3 min read

Shareholders together? Make clear arrangements in advance

Starting a Dutch private limited company (BV) together often means making decisions about the future of the business with multiple shareholders. As long as interests remain aligned, many arrangements may appear self-evident. But what happens if you disagree, one shareholder wants to leave, or someone wants to sell their shares?

A shareholders' agreement helps deal with such situations in advance. It records arrangements concerning the collaboration and the relationship between the shareholders.

The articles of association contain the BV's formal rules. A shareholders' agreement additionally provides room for arrangements specifically concerning the collaboration between the shareholders.

Which arrangements require attention?

Decision-making

Not every decision within a BV is equally significant. It may therefore be sensible to record in advance which important decisions require the agreement of all shareholders and when a majority is sufficient.

Examples include major investments, entering into important obligations, or changing the business activities.

You can also agree what happens if the shareholders cannot reach agreement. This helps prevent a difference of opinion from immediately resulting in deadlock.

Shareholder and managing director

In many BVs, the shareholders are also managing directors. In practice, those two roles then overlap, but legally they are distinct.

A shareholders' agreement can therefore also include arrangements about how managing directors exercise their powers. For example, the parties may agree that certain important decisions require the other shareholders' prior approval.

This can help prevent one managing director from independently making far-reaching decisions with major consequences for the business.

What happens if a shareholder wants to leave?

At some point, a shareholder may want to leave the business. It is sensible to agree in advance what will then happen to their shares.

Who may acquire the shares? Do the other shareholders have the first right to buy them? And how will the value of the shares be determined? Arrangements can also be made for situations in which a shareholder is required to exit.

Recording this in advance prevents these questions from arising only once the parties' interests are already opposed.

Competition after departure

What may a shareholder do after leaving the BV? It may be important to make arrangements about competing with the business and approaching clients or other business relationships.

A non-compete or non-solicitation clause is crucial for this purpose. Its content and scope must, however, be carefully tailored to the circumstances.

Dividends

Arrangements on profit distributions can also be important. Will dividends be distributed annually, or will part of the profit remain in the business for investment and growth?

Considering this in advance helps prevent shareholders from later having different expectations about what will happen to the profit.

If a shareholder leaves or has to sell their shares, valuation is often an important subject. How will the value be determined, and who will determine it?

A clear arrangement made in advance can prevent a great deal of discussion when shareholders part ways.

When should you record these arrangements?

The best time to record these arrangements is as early as possible. Ideally, you make them when the BV is incorporated and before a new shareholder joins.

This gives every shareholder clarity from the outset.

At that stage, you can calmly discuss what you expect from each other and what you want to arrange for situations that may arise in the future.

No shareholders' agreement?

Without a shareholders' agreement, shareholders largely rely on the articles of association, the law, and any further arrangements they have made with one another.

That does not automatically regulate every situation that may arise within a collaboration. Particularly in a BV with multiple shareholders, it can therefore be sensible to record important arrangements in advance.

Drafting a shareholders' agreement

A shareholders' agreement must fit both the business and the arrangements between the shareholders. It is therefore not merely a matter of recording standard provisions, but above all of asking: what do the shareholders want to agree with one another, and what happens if their collaboration changes?

At Legal Comfort, I help shareholders draft and review shareholders' agreements and record clear arrangements for the future.

Do you have a BV with multiple shareholders, or are you about to incorporate one? Please get in touch for a no-obligation discussion. I will be happy to consider your situation with you.