A carefully considered shareholder pact will protect not only the majority interests, but also those of the minority. The aim is to prepare an agreement that fosters trust and creates a common value. The inclusion of conditions that require, for example, the unanimous agreement of shareholders (or the agreement of a given minority shareholder) for certain corporate decisions is quite usual. The agreement should clearly include shareholder participation, the different classes of eligible shares (if the company has shares other than common shares), rights to each class of shares, shareholder voting rights and rights or restrictions granted to certain shareholders (i.e. stock call/purchase options/commercial restrictions, etc.). As a general rule, it is preferable to implement a shareholders` pact when the company is created and issues the first shares. Indeed, it can be positive to ensure that shareholders` expectations of the company are shared. At this stage, shareholders should, as far as possible, be in the same way about what they expect and receive from the company. If the differences of opinion between investors at this stage are too strong to enter into a shareholder pact, it will probably sound a warning about the nature of their future working relationship. There are quarrels and the possibility of conflicting views will always be relevant.
If shareholders can`t agree on the management of the company, a deadlock plan solves it. The agreement should clearly define how disputes can be resolved and what action should be taken. You need to understand in advance what your client wants to get out of the audacity in which he or she is going, as this will influence other decisions such as ownership structure, decision-making and exit strategy. It`s important to understand how the new business fits into your customer`s overall strategy. Shareholder agreements will often have restrictions on shareholders who participate in competing companies. A shareholder pact must determine the maximum number of directors and the percentage of shares required to appoint a director. It should also specify when and how a director can be removed, what his duties are, how the meetings are convened and how he will vote (i.e. will each director have a voice or will he have as many votes as the shareholder who appointed him?). One of the essential objectives of a shareholders` pact is to clarify what can lead to termination and what are the consequences of the different paths to be followed by the parties. They may also consider including provisions regulating the acquisition of capital to avoid dilution of existing shareholders.
This is especially relevant if you were a major investor. If there are more than two shareholders, depending on the allocation of decisions between the board of directors and shareholders and the number of directors or shareholders, it may nevertheless be interesting to think about where there may be an impasse and how it should be resolved.