The Shareholder Agreement – Indispensable for SMEs

A shareholder agreement (SHA) is a contractual arrangement between shareholders that regulates their rights and obligations towards one another. For SMEs with multiple shareholders, it is an important long-term safeguard for business interests.

While the articles of association primarily govern the company’s organisation in relation to third parties, the SHA establishes a bespoke framework for the internal relationships among shareholders. In typical scenarios, such as family businesses, entrepreneurial partnerships or investor-backed ventures, there are often differing expectations regarding control, returns and strategic direction. The SHA is key to ensuring these interests are coordinated and established in a binding manner at an early stage.

This is particularly relevant for SMEs, where shareholders are often closely involved in operations or otherwise closely tied to the company. Therefore, conflicts affect not only the ownership structure, but also business operations directly. In contrast, private individuals with larger equity stakes often prioritise safeguarding their invested capital and maintaining their influence.

One of the key features of an SHA is the coordination of voting rights. Shareholders commit to exercising their votes in a coordinated manner, rather than in isolation. This ensures that strategic decisions are made consistently and are not influenced by random majorities or short-term interests. At the same time, minority shareholders' concerns can be taken into account in advance through coordination, providing them with specific protection.

The exercise of voting rights is closely linked to the ability to influence corporate governance. In practice, provisions are often made regarding which shareholders are entitled to seats on the board of directors and which shareholders assume operational management roles. For entrepreneurs, this provides certainty over their role within the company. For investors, it creates transparency regarding how control is exercised and who bears strategic responsibility.

Another key issue is the transfer of shares. In SMEs in particular, maintaining a stable shareholder base is crucial. Without the right provisions in place, shareholdings could end up in the hands of third parties without any control. The SHA provides clear guidelines in this regard. Pre-emptive rights give existing shareholders access to shares that become available, purchase rights allow the acquisition of share packages upon clearly defined events such as death or incapacity to work, co-sale rights (tag-along) protect minority shareholders in the event of a sale, and co-sale obligations (drag-along) enable a coordinated exit. These mechanisms are particularly important in succession planning, the sale of equity stakes and changes in investors.

Finally, effective enforcement of the agreement is crucial. The effectiveness of an SHA depends on its sanction mechanisms. Contractual penalties ensure that breaches of the agreement have clear consequences, while the provision of purchase rights and the deposit of physically issued shares promote compliance with the agreed rules. These measures increase the reliability of the collaboration and significantly reduce the potential for conflict.

Overall, it is clear that a SHA is not just a “nice-to-have” for SMEs and investors, but a crucial instrument for securing control, stability and corporate value. It is essential to have a carefully structured approach tailored to individual needs.

Drafting a shareholder agreement requires legal precision, as well as an understanding of the economic and personal interests of those involved. Our experienced attorneys at law are here to help you develop a viable, tailored solution.