How to secure your company’s operation and future by means of a shareholders’ agreement

The reason is that there is no fully adequate legislation on this area; and without a legal agreement there is a risk of future disagreements, which may at worst have serious consequences for the company, its finances and owners.

The solution is a shareholders’ agreement or an amendment to the articles of association “in peacetime” whereby you and your co-owners can agree on the limits for the ownership.

Such agreement may regulate e.g. the decision-making process, liability and obligations, distribution of profits, measures in case of death or illness, clauses of confidentiality or non-competition, and provisions on how to divide the company if you or another owner wishes to sell or a new owner joins the management.

The formation of a shareholders’ agreement or an amendment to the articles of association may both prevent and scale down subsequent conflicts by providing a common fixed place and a mutual plan for you and the other owners.

A shareholders’ agreement from HjulmandKaptain puts you in a stronger position

The advantage for you of letting us draft your shareholders’ agreement is that we are specialists on this area, advising and drafting shareholders’ agreements and amendments to articles of association on a daily basis.

This means that not only do we know the subjects to be identified, we are also aware of the unique conditions which must be clarified for precisely your company.

Even if you can very well draft your own agreement based on standard templates, it is both difficult and time-consuming to ensure that the agreement is sufficiently detailed and legally valid if you have no experience in the specific area or knowledge of the law.

Further, it is decisive that the agreement is tailored to your company, the mutual ownership, the finances, and the wishes for the future if it is actually supposed to help solving conflicts – which is why a template agreement is often merely false security.

Thus, it may be problematic to rely on templates of shareholders’ agreements

A tailored, complete shareholders’ agreement is in our best experience not a standard job which may be managed by templates. Admittedly, some subjects are recurring in all agreements, but the contents of each provision must be adapted to the specific conditions of the company and between the owners.

With standard templates, you risk overlooking a decisive issue for precisely your company because it is not included in the template, or you may refer to a certain area too summarily, eventually making the agreement not sufficiently thorough and thus useless in a conflict.

At HjulmandKaptain, we see unfortunately too often that clients consult us either with incomplete agreements, in which material conditions are not clarified, or actually outdated agreements which have not been continuously updated, e.g. every 3 years, in order to match the company’s development.

In such situations, it is much cheaper and securer for everybody if the agreement is correctly drafted from the beginning, because conflicts between owners are expensive and exhausting for both the company and the relationship.

Differences between choosing a shareholders’ agreement or an amendment to the articles of association

There are two ways of entering into a legally valid agreement between two or more owners of a company, namely either a shareholders’ agreement or an amendment to the articles of association.

The right choice depends on your company, but often, we recommend a shareholders’ agreement or a combination of the two.

The disadvantage of merely amending the articles of association is that these are publicly available. As agreements between owners, however, often contain information on strategy, competitive environment, employments, finances, etc., it is rarely an ideal solution that the entire agreement is public.

The disadvantage of a shareholders’ agreement is, however, that it is binding only on the parties to the agreement. Consequently, a new owner is not bound by the agreement, and therefore, it may be best for some companies to combine the two options.

This is what you will get by letting HjulmandKaptain draft a shareholders’ agreement or an amendment to the articles of association

We will always ensure clarification of the following issues for you:

• The company’s capital and the owners’ obligation to contribute additional capital, e.g. as shareholders’ equity or loan capital
• Management of the company and provisions regulating elections to the board of directors and the executive board – What are the requirements for majority decisions? Is minority protection necessary?
• Owners’ employment with the company and their remuneration, if relevant
• Principal terms and conditions for any dealings between the company and the owners
• Guidelines for the distribution of dividend
• Pre-emption rights in shares, e.g. co-sale right and duty as well as guidelines for share pricing
• Non-competition clause in case of retirement of an owner
• Sanctions in case of breach of the shareholders’ agreement
• Dispute resolution, e.g. mediation, arbitration, and/or proceedings before the ordinary courts of law
• Requirement for any deadlock clause by 50/50 ownership
• Unique conditions of importance to your company and its owners

We are ready to assist you in securing your company’s future

We are specialists in both shareholders’ agreements and amendments of articles of association, our lawyers having long-standing experience within the area, and every year, we draft numerous shareholders’ agreements and amendments to articles of association for companies of any kind.

For you, this means that from experience, we know what subjects to be discussed at any time, and we can also quickly clarify any additional conditions to be focused on by precisely your company and its owners to ensure a complete agreement considering all kinds of scenarios.

Thus, a cooperation with us will ensure a stronger position for you and your company. So, please do not hesitate to contact us for a non-committal clarification of your possibilities.