The shareholders’ agreement – a contractual arrangement between shareholders of a company, having its perks in the Netherlands since 1944[1]. It is oftentimes used by shareholders of a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid – bv).
Shareholders’ Agreement – Bird’s eye view
Other than the articles of association of a bv, a shareholders’ agreement is a more flexible instrument in order to structure the relationship amongst the shareholders.
The present blog is intended to walk you through several of the advantages of a shareholders’ agreement. Comparisons will be drawn with the functioning of the articles of association of a bv. We will briefly touch upon the following topics:
- i. Contractual freedom;
- ii. Confidentiality;
- iii. Flexibility; and
- iv. The company’s continuity.
The advantages of Shareholders’ Agreements under the magnifier
- i. Contractual freedom
In principle, a shareholders’ agreement merely creates a contractual relationship. The parties are free to contract. The shareholders’ agreement is not directly bound by mandatory provisions of Dutch company law. The bv’s articles of association on the other hand are subject to such mandatory provisions. Less regulation, more freedom.
Also, in certain situations, the shareholders’ agreement as a contractual relationship can have a company law impact (vennootschappelijke werking) and can bind the bv as such. Resolutions of organs of a bv may then be challenged in court if such resolutions have been taken in violation of provisions of the shareholders’ agreement.
- ii. Confidentiality
Plain and simple, the articles of association of a bv are a publicly accessible document in the Netherlands. A shareholders’ agreement on the other hand can be made confidential.
- iii. Flexibility
In a lot of situations, the standard template of articles of associations of a bv is a relatively extensive document. Oftentimes whole passages of Dutch law seem to be rewritten within articles of association of a bv. Possibly a side effect of the obligatory consultation of a Dutch notary public (notaris). A shareholders’ agreement on the other hand is a tailor made instrument, which can be drafted in a succinct and concise manner. Thanks to it’s flexibility, deadlock situations and financial matters and other peculiarities are, in a lot of cases, dealt with in shareholders’ agreements. One can think about good leaver, bad leaver and shoot-out provisions in order to handle deadlock situations. Examples of financial matters would be the dividend policy, the granting of and dealings with loans (to shareholders as well as third parties) and management fees.
The flexibility of shareholders’ agreements also makes it possible to include specified provisions relating to the particular situation and circumstances of one specific shareholder or a group of certain shareholders.
- iv. The company’s continuity
It is common practice to have new shareholders accede to an in place shareholders’ agreement. It is possible to link the mandatory accession to a provisions of the articles of association. This greatly contributes to the continuity of the company as such.
Last but not least
Do you have any questions regarding a shareholders’ agreement for your company? The lawyers and advisors of LexQuire Tax & Law would be happy to assist you with their extensive knowledge with regard to corporate transactions and the drafting of shareholders’ agreements. You may directly reach us via e-mail (info@LexQuire.nl) or phone (43-711 22 07)
[1] Hoge Raad, 30 juni 1944, ECLI:NL:PHR:1944:BG9449 (Wennex).
