One of the most common causes is that the transaction and/or the behaviour of the co-shareholders do not meet the expectations of one or more shareholders. In the absence of a shareholders` pact with a withdrawal mechanism (i.e., a possibility of resolving a disagreement if you do not reach a solution), a disagreement can become a disaster. “This case underscores the need for a shareholders` pact at the outset of the proceedings, so that the valuation is established by mutual agreement at the time of the company`s exit on the first day of the company and is not imposed by a court.” The general rule is that you get what you pay for. However, in the case of an online shareholder contract that is automatically created by filling out a restricted electronic form, there are compelling reasons why everything you pay is a waste of money. An agreement for shareholders generally clarifies issues such as shareholder rights and obligations, management of the company, aspects related to employment, sale and issuance of shares, handling of disputes, disputes and the protection of the majority or minority of shareholders. Modern shareholder agreements generally deal with the sale of shares. For example, AVCAL`s open source shareholding contract has provisions on “bad leavers” – shareholders who are also employees and who have resigned or been dismissed for substantive reasons (violation of the employment contract, fraud, etc.) may be forced to resell their shares to the company. However, if you do not have a shareholder pact, you find yourself in a difficult situation. Regardless of that, you should consult all the documents you have. There must be a mechanism that prevents an escalation of differences of opinion that can end up in court. For some companies, this may mean the end of the journey.
In the absence of such a document, there is a high risk of shareholder conflict. It is best to understand what happens if there is no agreement before investing in a business. Even if shareholders who are in the agreement are at the same risk, the existence of such a document helps them to overcome a conflict more quickly and easily. For example, a shareholders` pact is particularly useful for companies in which the shares are held in equal shares (50% to 50%). But this often leads to another problem – the parties disagree on the evaluation. This should also be dealt with as part of a bespoke shareholder pact. I can give you a long list of problems (and I will ask for one), but it is more productive to study the underlying causes so that steps can be taken to provide mechanisms in a shareholders` pact to address the causes rather than the symptoms. But before I do, maybe you think… It is a shareholder pact. A shareholders` pact is a contract between shareholders (and, in general, the company) that governs the relationship between shareholders and defines a degree of control over the day-to-day operations of the company. A shareholder pact usually provides for this: But it`s easy to say, so we offer you a guarantee – if you think it`s not good value for money, we`ll reduce our fees to honor the price of a shareholder pact plus we give you an additional 10% discount.