What are the advantages of concluding a shareholders’ agreement?
A shareholders’ agreement, also known as a “pacte d’actionnaires”, is an agreement between two or more partners in a company (SAS, SA, SARL or other form of company) that governs their relationship outside the Articles of Association. The objectives and content of the agreement may vary depending on the specific needs of the partners and the nature of their cooperation. The explanations given here are intended to provide a general overview of the advantages of such an agreement.
Partners’ agreements can be beneficial for the following reasons:
- It can be used to regulate specific situations for certain partners, without involving all the partners, or to apply to all the partners, but for a limited period.
- Unlike the Articles of Association, a partnership agreement is confidential because it is not published in the Trade and Companies Register. It may therefore contain clauses that third parties should not be aware of, such as clauses on the distribution of rights that differ from those officially published.
- The shareholders’ agreement can easily be amended and adapted over time, provided that all the signatories or their successors agree to the amendments and adaptations.
What does a shareholders’ agreement generally contain?
A shareholders’ agreement may contain various clauses, provided that it is drafted carefully and complies with the legal rules and restrictions. Although there is no mandatory content, here are some common purposes for clauses in a shareholders’ agreement:
- Clauses relating to the holding, acquisition or preservation of a shareholding.
- Clauses providing for the entry of a new partner or the rights of a third party heir.
- Clauses aimed at settling disputes between partners.
- Clauses sanctioning reprehensible behaviour on the part of a partner.
- Clauses fixing the financial or political rights of partners.
- Clauses allocating powers between partners.
- Clauses prohibiting competition between partners.
- Clauses organising the balance between partners and legal representatives, etc.
- Clauses relating to the departure of a partner, including the exclusion clause.
Examples of clauses that may be included in a shareholders’ agreement:
- Anti-dilution clause: This clause protects shareholders against dilution of their share in the company’s capital during a capital increase, by guaranteeing that their percentage holding will be maintained using various techniques.
- Withdrawal clause: Shareholders wishing to sell their shares, particularly if they are a minority shareholder or in the event of a change of reference shareholder, can include a withdrawal clause. This allows them to leave the company at their own discretion, while obtaining repayment of the value of their shares, without having to find a buyer.
- Management control clause: minority shareholders who wish to exercise control over the management of the company can strengthen this power by including specific clauses.
Can a Foreign shareholders’ agreement be used for a French company?
When a shareholders’ agreement governs relations between the shareholders of a French company, it must comply with the principles of French company law, whether written or unwritten. The drafter of the agreement must therefore take account of these rules and know to what extent he can depart from them. In addition, it is necessary to take account of the specific features of the legal form of the company, because a clause that is valid for an SAS will not necessarily be valid for a SARL, for example.
It is therefore essential to :
- Call in a lawyer who specialises in drafting this type of document.
- Avoid relying on foreign laws.
It is essential to draft the agreement very carefully. It is often drawn up at the start of the life of a company or partnership, when the financial stakes are modest. However, as the company grows and the stakes become higher, it may be regrettable not to have a more secure document. At this stage, conflicts between partners can escalate considerably, and it may be too late to amend a poorly drafted agreement.
How effective is a partnership agreement?
A shareholders’ agreement is unknown to third parties and has no effect on them. Its effectiveness is therefore limited exclusively to the signatory partners and the company itself.
However, there is an exception to this rule. If a third party suffers a loss as a result of non-compliance with the agreement, it may invoke the agreement to claim compensation. This follows from a rule of case law in contract matters, according to which a person who is not a party to a contract cannot benefit from it, unless the provisions of that contract cause him damage. In this case, the third party can invoke breach of the covenant to obtain compensation.
If one of the signatory parties fails to comply with the covenant, it may be ordered to pay damages or even a sum stipulated in a penalty clause.
What is the duration of a shareholders’ agreement?
The term of a partnership agreement may vary depending on the provisions it contains. For example :
- A term linked to the presence of all or certain parties to the agreement.
- A fixed term.
- An indefinite term.
- The duration of the company
MFL registered lawyers remain at your entire disposal to answer your queries regarding shareholders agreement in France. MFL will provide you with the best lawyers to handle your project and provide you with accurate advices.