This guide gives you an idea of what a shareholder pact is, why it`s a good idea to have one from the beginning, and how you can navigate Cooley GO Docs in the Model Shareholders Agreement. 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. If a majority shareholder wants to sell its shares but a minority shareholder is not willing to give its consent, it is important to include a provision that requires that shareholder to sell its shares. This is often referred to as the „Drag Along“ provision. This will then allow the majority shareholder to realize his investment at a time and price that he deems reasonable. Of course, the price and other payments for the sale must be fair to all shareholders, including minority shareholders.
In addition to this common framework for the 2006 CA and a company`s articles, there is enormous leeway under a shareholders` pact to decide who can do what and under what circumstances. No, there is no legal obligation to have a formal shareholder pact. From the company`s perspective, the shareholders` pact provides a strong and unified framework that specifies how management should work in certain situations, for example. B the people they need to consult when they want to assign shares to new investors or give options to key employees. This can ensure the stability of the company in the event of disagreement or conflict in the future. Decisions on different topics could vary depending on the importance of each person to each shareholder.