What is included in a shareholders' agreement? Complete checklist

A shareholders' agreement essentially contains ten components: identity and shareholding structure, voting agreements, dividend policy, an offer obligation, price determination, leaver arrangements, tag along and drag along, a deadlock mechanism, non-compete and non-solicitation clauses, and a dispute resolution mechanism. The exact content varies per private limited company (BV), but you will never miss these ten topics if you want to be legally sound.

Bram and Joris thought their articles of association were sufficient. Until Joris, as a director, wanted to make an investment that Bram found absurd, and blocked the meeting. No voting agreement, no deadlock clause, no exit arrangement. Three months without a decision, then a mediator. In this article: all the clauses contained in a good shareholders' agreement, with an explanation for each section.

1. Parties, shares and purpose

The standard opening statement: who are the shareholders, which shares does whom hold, and what is this all about? Sounds elementary, and it is — but with subsequent changes (admission, split, holding company), a good definition of the parties is the difference between clarity and spaghetti. The legal basis for the BV and its shareholders is found in Book 2 of the Dutch Civil Code.

2. Voting and decision-making agreements

Which decisions can you take with a simple majority, and for which do you need unanimity or a qualified majority? Consider major investments, appointing a new director, a loan from or to the BV, or changing the business model. Without an agreement, you fall back on the articles of association, which often simply provide for a “majority”—which does not always work out in a 50/50 or 60/40 structure.

A common structure: a list of “reserved matters” that always require unanimity (or a majority of, for example, 75%). This protects minority shareholders and prevents the majority from unilaterally changing the course.

3. Governance and governance agreements

Who becomes a director, how are you appointed or dismissed, and which decisions do you make as a board versus as a shareholders' meeting? In practice, many entrepreneurs wear two hats (shareholder and director), which can lead to interesting legal situations. Read also when the liability of directors comes into play.

4. Obligation to make an offer upon withdrawal

Anyone wishing to sell their shares must first offer them to the other shareholders (the so-called preferential arrangement or right of first refusal). Only if they do not purchase may you sell externally. This prevents your fellow shareholder from suddenly having a stranger at the table.

Crucial point: describe the “triggers” carefully. Voluntary sale is clear. But what to do in the event of death, bankruptcy, divorce (consider community of property), or dismissal as a director? A good clause names them all.

5. Pricing

When someone exits, how is the price of their shares determined? Three common methods:

• Pre-agreed formula — for example, a multiple of the average profit over three years.
• Book value, intrinsic value, or market value — depending on what suits your BV.
• Binding advice from a third party — an independent registered valuer is often called upon when parties disagree.

The choice of pricing method often determines more than parties initially realize. A predetermined formula provides certainty but may turn out lower than the true value in a peak year. We usually recommend a combination: a fixed formula for regular situations, and a registered valuator for conflict situations.

6. Good leaver / bad leaver

The circumstances of departure determine the price. A shareholder who leaves the BV due to death, long-term illness, or through no fault of their own is generally treated as a good leaver: a market-based price. A shareholder who violates their non-compete clause or is dismissed for urgent reasons is a bad leaver: a reduced price (often nominal value or a fraction of the market value).

The full explanation with practical examples can be found in good leaver vs. bad leaver in the shareholders' agreement.

7. Tag along and drag along

Two clauses that bring some value to the table in the event of a potential sale. Tag along protects the minority: if the majority sells its shares, the minority may sell along under the same conditions. Drag along protects the majority: in the event of a sale of, for example, 75% of the shares, the majority can force the remaining shareholders to sell along. As a result, a stubborn minority cannot block a takeover.

8. Deadlock arrangement

What if you can't reach an agreement? A decent shareholders' agreement contains a deadlock clause with a phased approach: first escalation to a second meeting, then a mediator, and finally a binding mechanism as a last resort. There are several models for this, ranging from a casting vote to Russian roulette (one party makes an offer, the other chooses whether to buy or sell). The variations and pitfalls are outlined in the deadlock clause in the shareholders' agreement.

9. Non-compete and non-solicitation clause

The part everyone forgets — until a former shareholder opens a competitor around the corner, client list and all. A non-compete clause for shareholders can be stricter than one for employees, because shareholders typically hold a higher stake and have more information. Also, do not forget the non-solicitation clause (no taking clients or staff) and a non-solicitation clause (no actively soliciting).

10. Dividend policy, confidentiality and dispute resolution

The final three:

• Dividend policy: what is distributed, what remains in the BV, and who decides? Particularly relevant if one shareholder wants to live off the dividend and the other from growth.
• Confidentiality: what shareholders hear within the BV remains within the BV, before and after their shareholding.
• Dispute resolution: which law applies, which court has jurisdiction, and — more interestingly — are you deviating to arbitration or binding advice? Mediation as a mandatory preliminary phase is common.

What doesn't belong in it?

Two things that often mistakenly end up in a shareholders' agreement: employment agreements and general terms and conditions for customers. A shareholders' agreement concerns the relationship between shareholders. Employment agreements belong in an employment contract or management agreement; commercial agreements with customers in general terms and conditions. Cramming everything into a single document makes it legally shaky and unreadable in practice.

Honest recommendation

The above text is a checklist, not a writing guide. Each of these clauses can be formulated in ten different ways, and the wrong wording will cost you money immediately in a conflict. For the right mix for your BV, a lawyer with experience in corporate law is not only helpful but, in practice, an investment that pays for itself at the very first discussion.

Explore the options for having your shareholders' agreement drafted or reviewed by MKB Juristen. For the complete starting point, see the pillar post ' what is a shareholders' agreement'.

Frequently Asked Questions