Shareholders' Agreement SHA

A shareholders' agreement covers the questions that the owners of a company would otherwise argue about later: who decides what, who may sell shares to whom, and what happens when someone wants to leave. Take three founders who bring in an outside investor for a fifth of the company. All four will want the answers in writing first.

One group of clauses is about decisions: who may appoint directors, and which matters need the consent of a particular shareholder or a larger majority. A second group is about shares. A right of first refusal lets the existing owners buy before an outsider can. A drag-along clause lets a majority that has found a buyer require the minority to sell on the same terms. A tag-along clause gives the minority the right to join that sale. A third group covers what happens when things go wrong: a founder who leaves, a deadlock between owners, or a dispute that has to be decided somewhere.

The articles of association are the company's constitution, while a shareholders' agreement is a contract between the people who signed it. Three consequences follow. Each depends on the company law of the country of registration.

The first is publicity. Articles are typically filed with a company register, where others can read them. A shareholders' agreement normally stays private. The second is who is bound. Articles apply to every shareholder, including future ones. A contract binds only its parties, so a new shareholder has to sign up to it. The third is what happens when the two documents say different things. Which one prevails is a question for the governing law. Many agreements address it with a clause in which the parties undertake to amend the articles if a conflict appears.

Under EU law, in principle yes. Article 25 of the eIDAS Regulation says that an electronic signature cannot be denied legal effect or refused as evidence solely because it is electronic. It also gives a qualified electronic signature the equivalent legal effect of a handwritten one.

The regulation does not replace national rules about form. Article 2(3) leaves them intact. Whether a shareholders' agreement needs more than a signature therefore depends on its governing law and on the law of the country where the company is registered. The clauses to check are those that commit a shareholder to transfer shares in future, such as drag-along rights and options. Some countries require a notary for an undertaking of that kind.

Where no form is imposed, the parties choose the signature level. A shareholders' agreement may be relied on years later against someone who no longer wishes to be bound. The useful question is how easily each signature can then be tied to the person who made it. A qualified signature rests on a certificate that is issued only after the provider has verified the signer's identity (Article 24(1)), which is where its evidential weight comes from.

Each adviser has to identify its own client, where the adviser is covered by anti-money laundering rules. Article 3(3)(b) of the EU Anti-Money Laundering Regulation makes lawyers and notaries obliged entities when they assist with certain transactions. The list includes buying and selling business entities and the creation, operation or management of companies. A shareholders' agreement drafted for an investment round or a company formation will often be part of such work.

Where the rules apply, Article 20(1) sets out the measures, which include verifying the client's identity and identifying its beneficial owners. If the client is a company, the firm must also verify the identity and the authority of the person who acts for it. Under Article 23(1), verification takes place before the business relationship is established. The regulation applies from 10 July 2027. Until then, national laws implementing the EU anti-money laundering directives apply.

The other shareholders are usually not the adviser's clients. There is one exception: a lawyer or notary who is the only one intermediating a transaction must treat both parties as customers (Article 19(6)(b)). Outside that case, no EU rule requires the other signatories to be identified.

Yes. Under the EU Anti-Money Laundering Regulation, a beneficial owner is a natural person who has an ownership interest in a company or who controls it by other means (Article 51). An ownership interest means 25% or more of the shares or voting rights, held directly or indirectly (Article 52(1)).

Article 53(3) says that control by other means always includes the right to appoint or remove a majority of the board, relevant veto or decision rights attached to a share, and decisions on the distribution of profit. Article 53(4) adds that control may also arise from formal or informal agreements with owners and from voting arrangements. A shareholders' agreement creates rights of exactly this kind.

Suppose the investor in the earlier example holds 20% of the shares, below the ownership threshold, but the agreement lets her appoint three of the five directors. The share register alone would not show her as a beneficial owner. The agreement would. A firm taking a company on as a client therefore has good reason to ask whether a shareholders' agreement exists.

The parties should keep the signed agreement, every amendment and every document by which a new shareholder joined. They are needed for as long as the agreement is in force and for the limitation period after it ends, which the governing law sets.

Advisers covered by anti-money laundering rules have a separate duty. Under Article 77, they keep a copy of the documents and information obtained in customer due diligence for five years from the end of the business relationship. After that the personal data must be deleted, unless another law requires it to be kept for longer. Identity documents collected for any other reason may be kept no longer than the purpose requires (Article 5(1)(e) of the GDPR).