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The shareholders' agreement

Updated: Aug 9, 2023

There is much involved in setting up a Dutch (private limited liability) company. The company must be established with a notarial deed. This deed contains the articles of association: the internal rules and commitments of the legal entity. The internal rules and commitments can be specified in a shareholders' agreement. In this blog, you will learn more about this.


Definition

A shareholders' agreement is an agreement between shareholders in which arrangements on all kinds of subjects can be set out. The content of the agreement may somewhat overlap with the articles of association. However, an important difference is that the articles of association, as part of the notarial deed, are publicly available for consultation. The shareholders' agreement is not.


Content

It is important to keep in mind that, based on the basic principle of freedom of contract, the parties involved in drafting the shareholders’ agreement are free to determine the content of the agreement. Topics commonly covered in a shareholders' agreement are:

  • Mandatory offer of shares: a shareholder can be obliged in the agreement to sell his shares to the other shareholders. The articles of association often contain such a provision as well. This provision can be specified in the shareholders' agreement.

  • Drag-along/tag-along provision: under the drag-along provision, shareholders are obliged to sell their shares to a third party if one of the shareholders does so. Under the tag-along provision, the shareholders have a right to sell to a third party if one of the shareholders does so.

  • Good leaver/bad leaver provision: the good leaver/bad leaver provision rewards or punishes shareholders for what they have done for the company as shareholders. A shareholder who has complied with the arrangements in the shareholders' agreement is financially compensated upon departure. A shareholder who has not complied with the arrangements will receive less money for his/her share.

  • Penalty clause: a penalty clause serves as an additional incentive for the shareholders to comply. The shareholders can agree that a shareholder who violates a certain provision of the shareholders' agreement will owe a fine to the other shareholders.

  • Confidentiality clause: a confidentiality clause ensures that shareholders (after leaving the company) do not share company-sensitive information with third parties.

  • Perpetual clause: under the perpetual clause, a shareholder can only sell his shares if the new shareholder promises to comply with the obligations under the shareholders’ agreement.


Relation to articles of association

As noted above, the articles of association may overlap with the content of the shareholders' agreement. This does not pose any problems as long as the provisions of the articles of association and the provisions of the shareholders' agreement are compatible. If they are not, then, in principle, the provisions of the articles of association take precedence over the provisions of the shareholders' agreement.


Need advice?

Do you need advice on the establishment of your company? Have you already established your company and do you need help drafting a shareholders’ agreement? Do you have any other corporate law questions? Feel free to contact one of our lawyers.

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