Corporate Law
The arrival of a new investor, a need for funding or a wish to sell a shareholding may reveal differences between shareholders. A shareholders’ agreement enables the parties to anticipate these situations and agree their respective commitments concerning the development of the business.
Its usefulness depends on clearly defined obligations and careful coordination with the company’s articles of association.
A shareholders’ agreement, as provided for in Article 17 of the Portuguese Companies Code, is entered into by all or some of the shareholders to govern their commitments in that capacity.
It may cover the exercise of voting rights, the funding of the company and the transfer of shareholdings, within the limits imposed by law.
The agreement may provide for prior consultation or commitments on how shareholders will vote on specific matters. It cannot, however, bind directors or members of supervisory bodies as regards the performance of their duties.
For funding commitments, it is important to specify who is to contribute, how much, in what form and by when. The agreement should also address what happens if a shareholder does not contribute, while ensuring compliance with the corporate resolutions and formalities required by law.
The agreement may provide for pre-emption rights and conditions governing the sale of shareholdings, including valuation criteria and payment deadlines. The accession of new shareholders to the agreement should be expressly addressed, as acquiring a shareholding does not automatically make them parties to it.
It may also include tag-along provisions, allowing a shareholder to participate in another shareholder’s sale, or drag-along provisions, enabling certain shareholders to require other signatories to sell their shareholdings. The conditions for exercising these rights, the price and the payment terms should be clearly defined.
The agreement binds its parties and does not replace the articles of association. A breach of the agreement does not, of itself, provide grounds for challenging a corporate resolution, although it may give rise to contractual liability.
Provision should also be made for resolving deadlock, particularly in companies owned in equal shares. Negotiation, mediation or arrangements for the purchase and sale of shareholdings may be considered, with clearly defined procedures and time limits.
The agreement should also specify the consequences of breach, its duration and the conditions governing its review.
A shareholders’ agreement allows shareholders to discuss in advance decisions that could jeopardise the company’s continued operation. Its preparation should take account of the corporate structure, funding requirements and shareholders’ expectations as to their continued involvement in the business.
VPA is available to assist with the drafting, negotiation and review of shareholders’ agreements, ensuring consistency with the articles of association and a clear definition of shareholders’ rights and obligations.
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