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This shareholders' agreement checklist covers the points that belong in virtually every SHA: control and voting arrangements, dividend policy, the blocking mechanism, good/bad leaver clauses, tag and drag-along clauses, and a dispute resolution mechanism. A shareholders' agreement sets out the mutual agreements between shareholders, alongside the public articles of association. Use this list to check if your draft is complete before you sign. Below are points to look out for per section.
The short answer
- Control: voting agreements and decisions requiring a reinforced majority.
- Dividend: when is paid out and when is reserved.
- Blocking: obligation to offer and valuation method upon sale.
- Departure: good/bad leaver and the corresponding price.
- Sales: tag along and drag along.
- Conflict: a deadlock and dispute resolution mechanism.
1. Control and voting agreements
Start with the control structure. Does voting right follow the share distribution, or do you deviate from it? Specify which decisions a simple majority may take and which require a reinforced majority or unanimity. These “reserved matters” protect minority shareholders against far-reaching decisions, such as a major investment, taking out a loan, or admitting new shareholders. Without this list, a majority can push through anything.
2. Dividend policy
Different shareholders often have different cash needs. One wants dividends to live on, while another wants to reinvest. Therefore, establish when profits are distributed and when they are reserved, for example as a percentage of net profit or linked to a minimum buffer. Bear in mind that the board is legally required to perform a distribution test when making a distribution: will the company still be able to pay its due debts after the distribution? The dividend policy in the SHA is therefore always subject to that legal reservation.
3. Blocking arrangement
A shareholder may not simply sell their shares to an arbitrary third party. The statutory blocking provision and/or articles of association stipulate an obligation to offer: the shares are first offered to the co-shareholders. Check whether your SHA aligns with this and whether the valuation method is concrete. Avoid vague terms such as “a reasonable price”; choose a fixed calculation method or a binding valuation by an independent expert.
4. Good leaver / bad leaver
Link the reason for departure to the price. A good leaver, for example in the event of retirement, death, or long-term illness, offers at the full value. A bad leaver, for example in the event of dismissal due to non-performance or violation of a non-competition clause, offers at a lower price. Also determine the offer period and who may acquire the shares. Without a leaver arrangement, a departing shareholder simply retains their interest, while no longer contributing.
5. Tag along and drag along
- Tag-along right: if the majority sells, the minority may sell along under the same conditions. Protects the minority against an unknown new co-shareholder.
- Drag-along (co-sell obligation): if a buyer wants 100%, the majority can require the minority to sell along under the same conditions. This prevents a single shareholder from blocking an attractive sale.
Align the threshold (for example, the percentage at which drag along applies) with your relationship.
6. Dispute and deadlock arrangement
Indispensable, especially with a 50/50 ownership structure. Stipulate what happens if shareholders cannot reach an agreement among themselves: mandatory mediation, binding arbitration, or a shoot-out arrangement where one buys out the other. Without a mechanism, the business grinds to a halt in the event of a conflict.
7. Other provisions
- Non-compete and non-solicitation clauses: what a departing shareholder is and is not allowed to do.
- Confidentiality: protection of commercially sensitive information.
- Management fee: agreements regarding the remuneration of active shareholders.
- Alignment with the Articles of Association: verify that the SHA and the Articles of Association do not contradict each other.
- Term and amendment: how to adjust the agreement later.
Honest recommendation
Use this checklist to test your draft before signing. For an existing SHA that functions well, you do not need a lawyer to review these points annually: that is perfectly fine to do yourself. As soon as a point is missing or unclear, or when drafting a new agreement, professional review is advisable, particularly due to the connection with the articles of association and the statutory distribution test.
Practical example: during an audit, it turned out that a SHA contained an obligation to offer shares, but no valuation method. When a shareholder left, the discussion regarding the price alone cost more than drafting the entire agreement had cost. One missing item on the checklist.
Read more: the shareholders' agreement, the common pitfalls , and the question of whether a SHA mandatory .
Frequently Asked Questions
Voting agreements and reserved matters, dividend policy, a blocking arrangement with valuation method, good/bad leaver, tag and drag along, and a dispute resolution mechanism. Supplemented by a non-compete clause and confidentiality. Everything must align with the articles of association.
Decisions requiring a reinforced majority or unanimity, such as a major investment, a loan, or admitting new shareholders. They protect minority shareholders against far-reaching decisions that a majority could otherwise push through alone.
For example, as a percentage of net profit or linked to a minimum buffer. Bear in mind that the board performs a statutory distribution test for every distribution: the company must still be able to pay its due debts thereafter. The policy is subject to that proviso.
Because vague terms like “a reasonable price” lead to disputes as soon as a shareholder leaves. Choose a fixed calculation method, such as a multiple of earnings or intrinsic value, or a binding valuation by an independent expert.
In a 50/50 relationship, this is indispensable, because otherwise neither party can force a decision. A dispute resolution mechanism is also advisable in other relationships. Consider mandatory mediation, binding arbitration, or a shoot-out arrangement.
Yes. In principle, the agreement applies between the parties, but the articles of association apply to the company and third parties. A contradiction creates uncertainty. Verify that both documents are aligned.
Yes, to test your draft and to periodically review an existing SHA. Professional review is advisable during drafting or as soon as a point is missing, particularly due to the connection with the articles of association and the statutory distribution test.
