One or more owners?
Entrepreneurship
When multiple owners run a business together, it is advisable to have a shareholders' agreement that regulates the relationship between the owners.
When multiple owners run a business together, it is advisable to have a shareholders' agreement that regulates the relationship between the owners.
As the name suggests, the shareholders' agreement is an agreement between the owners of a company. The shareholders' agreement helps to align expectations regarding rights, obligations, and responsibilities among the company's different owners.
Why a shareholders' agreement is important
When drafting a shareholders' agreement, the owners must discuss how they will run the company together going forward, both when things are going well and also if things are not going so well. The value of a good shareholders' agreement lies in a healthy alignment of expectations between the owners about rights, obligations, and responsibilities.
The shareholders' agreement should be made in "peacetime," but comes into its own if conflicts arise along the way. The shareholders' agreement must be proper, fair, and balanced for all parties, regardless of whether the parties have a small or large ownership share. This ensures that all owners, despite any differences in ownership share, are treated equally, both when they join as new owners and if they later choose to leave again.
The purpose of the shareholders' agreement is to safeguard both the individual owner's and the company's interests. It is important to ensure that the company has a solid foundation, even if illness or disagreements among the owners should arise along the way.
What should the shareholders' agreement contain?
There are several elements that can advantageously be included in the shareholders' agreement. Lawyer Humle Pugh, from Penta Advokater, lists some examples here:
Financing
The owners should align expectations about how the company should be financed. Should an owner guarantee a line of credit or not? Should money be lent to the company, and if so, how and when should this money be repaid?
Management and decisions
Who should be in charge in the company? Should there be a board of directors or an executive management? Does an owner have the right to sit on the board or in the executive management, and how often should meetings be held to discuss the company's affairs? Who can make decisions about what? Should decisions be made by majority, by supermajority, or unanimously?
Work obligations
How much should each owner work in the company, how should they be compensated for this, and what areas of responsibility should they handle?
Exit as an owner
How does an owner leave the company again? Should the existing owners have a right of first refusal? How should capital shares be valued? Should owners be subject to non-competition and customer clauses? Should the majority have the option to sell the entire company?
Separate property
Should the ownership share be separate property so that it does not form part of the joint marital property in case the owner gets divorced?
The above are just examples of some of the elements that can be included in a shareholders' agreement. What they have in common is that they create an alignment of expectations between the owners and safeguard both the owners' and the company's interests.
This guide is provided by Penta Advokater
Penta Advokater is part of our advisory network. Their help is indispensable in our work with entrepreneurship, where they share their knowledge and make their expertise available to our entrepreneurs.
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