What is a shareholders' agreement?
A shareholders' agreement is a private-law contract between a company's owners that governs how their cooperation is to work and which rights and obligations apply. Unlike the articles of association, the agreement is not public, which makes it possible to govern matters that are not suited to open documentation.
In practice, the agreement can cover how decisions are made, how the board is appointed and what applies when shares are sold. It can also contain rules on non-competition, dividends and capital contributions. The purpose is to create clarity and stability between the owners, in good times and bad.
What a shareholders' agreement governs
Here are some common characteristics that make it easier to understand how shareholders' agreements work.
- Governs the cooperation between owners
- Complements the articles of association
- Can control the sale of shares
- Protects minority shareholders
- Creates clarity and stability
Once you know these elements, it becomes easier to understand the role a shareholders' agreement plays in both small and large companies.
How shareholders' agreements affect owners
Worth bearing in mind
When you invest in a company, it is important to understand which rules govern the cooperation between the owners. A shareholders' agreement can govern how decisions are made, how shares may be sold and how any conflicts are to be resolved. It provides security and creates a structure for how the owners are to act, both day to day and in more critical situations.
The shareholders' agreement is especially central in unlisted companies. There, matters such as rights of first refusal (förköpsrätt), post-transfer pre-emption clauses (hembud), drag-along and tag-along can be of great importance for your ability to sell shares and protect your ownership. Clear agreements reduce the risk of misunderstandings and make it easier to plan for future changes in ownership.
Frequently asked questions
Is a shareholders' agreement mandatory?
No. But it is strongly recommended, especially in unlisted companies where ownership relationships are longer term and less regulated.
What happens if the agreement is breached?
Since it is a private-law contract, a breach can lead to damages or other legal consequences.
Can the agreement be changed over time?
Yes. It can be updated when the owners agree that the terms need to change.
How does it differ from the articles of association?
The articles of association are public and follow the Swedish Companies Act (aktiebolagslagen). The shareholders' agreement is private and can contain more detailed terms.
Do all owners need to sign?
Yes. For the agreement to be valid and create clarity, all shareholders need to stand behind it.