Shareholders' Agreement vs. Articles of Association: many benefits!

A shareholders' agreement and the articles of association both regulate the rules of the game within a private limited company (BV), but they complement each other: the articles of association are legally mandatory, public, and can only be amended via a notary, whereas a shareholders' agreement is non-mandatory, confidential, and can be flexibly amended privately. For many entrepreneurs, the shareholders' agreement is therefore the instrument for recording concrete, tailor-made agreements that they would rather not include in the public articles of association. Below, you can read about the difference, the benefits, the risks, a practical example, and what is best regulated in which document.

Shareholders' Agreement vs. Articles of Association: the difference in brief

The two documents differ on a few key points. These are the main differences:

• Obligation: Articles of association are legally required for the incorporation of a BV; a shareholders' agreement is not.
• Public access: the articles of association are accessible to everyone via the Trade Register of the Chamber of Commerce; a shareholders' agreement remains confidential.
• Amendments: an amendment to the articles of association requires a notarial deed; in principle, a shareholders' agreement is amended privately, without a notary.
• Effect: articles of association are in principle binding on everyone (including third parties), whereas a shareholders' agreement primarily binds the parties who sign it.
• Content: the articles of association contain the structural basic rules; in the shareholders' agreement, you record the concrete, tailor-made agreements.

What are articles of association and what is a shareholders' agreement?

The articles of association form the legal foundation of your company. They are drawn up by a notary upon the incorporation of the BV and contain the basic rules: the name, the purpose, the share capital, and the powers of the board and the general meeting. Due to their formal nature, standard articles of association rarely align seamlessly with the specific situation of the shareholders.

A ' agreement is a contract between the shareholders. In it, you record agreements regarding the operation of the company, the transferability of shares, and the rights attached to the shares. It is a supplement to the articles of association, providing tailored provisions that are difficult or undesirable to include in the articles. Both documents fall under corporate law and work best when aligned with one another.

Advantage 1: a shareholders' agreement is not mandatory, but it is wise

When establishing a company, you must draft articles of association. This is logical: these articles constitute the internal rules of your business. A shareholders' agreement, on the other hand, is not mandatory. Nevertheless, its use is highly recommended, especially if you wish to prevent conflicts.

Precisely because it is not mandatory, many starting entrepreneurs skip this step. That is risky: as long as things are going well, no one misses the agreements, but in the event of a conflict, the departure of a co-shareholder, illness, or death, there is a complete lack of guidance. A good agreement prevents you from discovering at the worst possible moment that nothing has been recorded.

Advantage 2: more room for confidential agreements

The articles of association of a company are registered with the Trade Register of the Chamber of Commerce via a notary and can subsequently be requested for a fee. Consequently, anyone can inspect them; this happens regularly, especially in the case of larger transactions. As a result, articles of association are not a suitable means for discreet agreements.

The situation is different with a shareholders' agreement: it does not need to be made public and remains confidential between the shareholders. Consequently, sensitive topics such as dividend policy, remuneration agreements, or valuation methods are preferably laid down in a shareholders' agreement rather than in the articles of association.

Advantage 3: easier and cheaper to adjust

Articles of association are not static; they can be amended. However, this involves a formal procedure: an amendment to the articles of association goes through a notary and must be re-registered. This is cumbersome and comes with a price tag. Depending on the complexity, notary fees can add up; request a quote in advance, as rates vary by notary and situation.

Amending a shareholders' agreement is generally simpler and cheaper, because in principle you not need a notary. This allows you to adapt agreements more quickly to changing circumstances, for example when a new shareholder joins or the division of roles changes. However, be sure to have the text legally reviewed, as a “quick” amendment that is poorly worded can actually lead to disputes later on.

Advantage 4: a wider range of applications

The flexibility of the articles of association has increased in recent years, partly due to the introduction of the flex-bv. Nevertheless, a shareholders' agreement remains useful, particularly because of its broad scope of application.

To amend the articles of association, a resolution of the general meeting is required, usually by a majority vote. Amendments to the articles of association are therefore rarely the work of small shareholders. With a shareholders' agreement, this need not be the case. For instance, various small shareholders together to speak with one voice and thus influence on the management as a minority . The purpose of a shareholders' agreement is therefore fundamentally different from that of the articles of association.

The possibilities are extensive. In a shareholders' agreement, you can agree on, among other things:

• how the shares are valued upon entry and exit;
• a mutual right of first refusal (offering to co-shareholders first) or an obligation to offer;
• rules for the appointment and dismissal of directors;
• a special majority requirement for important decisions, such as the purchase or sale of real estate;
• a dispute resolution mechanism, a non-compete clause or agreements regarding dividend distribution;
• a departure arrangement for situations in which a shareholder becomes incapacitated or the partnership ends.

Which agreements belong where?

The documents are not substitutes for one another, but a combination. As a rule of thumb: the articles of association contain the structural, legally required rules that also apply to third parties. In the shareholders' agreement, you record the concrete, confidential, and flexible agreements between the shareholders.

Typical in the articles of association

• name, registered office and purpose of the company;
• the authorized and issued capital and the classes of shares;
• the powers of the Board and the General Meeting;
• a possible blocking arrangement for the transfer of shares.

Typical in the shareholders' agreement

• valuation method upon the entry and exit of a shareholder;
• agreements regarding dividends, remuneration, and management;
• voting agreements and protection of a minority interest;
• exit, dispute, and non-competition arrangements.

Important to note: in the event of a conflict between the two documents, the outcome may vary depending on the situation. A corporate law provision in the articles of association may have a different effect than a purely contractual agreement between the parties. Therefore, align the texts carefully so that they reinforce each other rather than contradict one another. Unsure how a specific agreement is best implemented? Have both documents reviewed in conjunction.

Practical example: why the combination matters

Suppose three entrepreneurs jointly establish a private limited company (BV), each holding one-third of the shares. The standard articles of association say nothing about what happens if one of them wishes to leave or is absent for an extended period. As long as the collaboration runs smoothly, no one notices.

When one of the three wishes to withdraw after a few years, a dispute arises: at what price will the shares be acquired, and is there even a buyer? Without agreements, this can escalate into a protracted conflict and even a court case. With a shareholders' agreement containing an offer obligation, a valuation method , and a departure arrangement , it is clear in advance how the withdrawal will proceed. This reduces uncertainty, costs, and relationships. This example shows why the two documents are stronger together than either one separately.

When do you draft a shareholders' agreement?

A shareholders' agreement is particularly useful at times when relationships change or are new. Consider:

• upon the incorporation of a private limited company with two or more shareholders;
• if a new shareholder or investor joins;
• when a family member or employee receives shares;
• if the collaboration changes, for example due to a changed division of roles.

The best time to make agreements is when everyone is still in agreement. Waiting until a conflict arises makes drafting more difficult and relationships more strained.

Drafting a shareholders' agreement: here's how to do it

The points above show that a shareholders' agreement is not an unnecessary luxury. Because complex agreements are involved, it is better not to handle it entirely on your own. You can, of course, start thinking about the content and the agreements you wish to make, and put them on paper in advance.

You engage a specialist to draft the specific clauses. They will point out the risks of certain agreements and raise topics you might not have considered yet, but which are nonetheless important. This ensures you obtain a shareholders' agreement where all parties win. If you are unsure about the correct structure, you can turn to our legal assistance for entrepreneurs.

Frequently asked questions about shareholders' agreement and articles of association

Is a shareholders' agreement mandatory?

No. Unlike the articles of association, which are mandatory upon the incorporation of a BV, a shareholders' agreement is not legally required. However, for companies with multiple shareholders, it is strongly recommended, as it prevents conflicts and ambiguity.

Which takes precedence: the articles of association or the shareholders' agreement?

That depends on the subject matter and the wording. Articles of association have corporate legal effect and are also binding on third parties; a shareholders' agreement is primarily a contract between the signatories. In the event of conflicting provisions, the outcome cannot always be determined in advance, so have both documents aligned.

Can I amend a shareholders' agreement without a notary?

In principle, yes. A shareholders' agreement is usually amended privately, without a notary. An amendment to the articles of association, on the other hand, requires a notarial deed. However, do have any amendment legally reviewed to ensure the new text does not have any unintended consequences.

Are the articles of association of a private limited company public?

Yes. The articles of association are registered with the Trade Register of the Chamber of Commerce via the notary and can be requested there for a fee. A shareholders' agreement is not public and remains confidential between the shareholders.

How much does a shareholders' agreement cost?

The costs depend on the number of shareholders, the complexity, and the agreements you wish to record. Because a notary is not required, the costs are generally lower than for an amendment to the articles of association. Request a quote in advance to avoid any surprises.

Do you need a shareholders' agreement with a single shareholder?

With a single shareholder, a shareholders' agreement is not sensible, as there is no counterparty with whom to make agreements. If a second shareholder joins, it is wise to immediately establish the mutual ground rules.

Help with your shareholders' agreement

Would you like to have a shareholders' agreement drafted or have your existing agreements reviewed? Our legal experts will help you with a document that suits your company and fellow shareholders. See what we can do regarding a shareholders' agreement or schedule an intake directly. We would be happy to explain, without obligation, what is sensible in your situation.