Shareholder agreements are contractual arrangements made between the shareholders of a company. They are used to govern the relationships among shareholders and to clarify each shareholder’s rights and obligations in specific situations such as the transfer of shares, succession, or profit distribution. In Switzerland, shareholder agreements are quite common and can be customized according to the specific needs of each company.
Signing a shareholder agreement is crucial to prevent conflicts among the various associates of a company. It is especially recommended to clarify the situation when multiple parties are involved in a company, particularly for an SA (Société Anonyme or Public Limited Company). However, such agreements are not regulated by law, and the relationships vary according to the company. Therefore, there is no standard contract. Nevertheless, it is recommended to seek the advice of a competent lawyer when drafting this contract.
In this text, we will examine some clauses that can be found in shareholder agreements in Switzerland.
Right of first refusal and preemption, obligation to purchase
The right of first refusal and preemption allows a shareholder to repurchase shares from another shareholder. The right of first refusal clause stipulates that if a shareholder wishes to sell their shares, they must first offer them to the company or other shareholders before selling to a third party. The right of preemption allows existing shareholders to repurchase shares from a shareholder who wants to sell to a third party. Finally, the obligation to purchase obliges a shareholder to sell their shares to another shareholder or the company in specific situations, such as non-compliance with commitments or cessation of function.
Right of repurchase
The right of repurchase allows a shareholder to repurchase their shares from a third-party buyer if certain conditions are met. For example, if a third party acquires a majority stake in the company, minority shareholders can exercise their right of repurchase to regain their shares. The right of repurchase must be specified in the shareholder agreement, with conditions and deadlines for exercising it.
Type of voting
The shareholder agreement can specify the type of voting to be used at general meetings, for example, voting by head or by shares. Voting by head means that each shareholder has one vote, regardless of the number of shares they own. Voting by shares allows shareholders to vote according to the number of shares they hold. The choice of voting type will depend on the preferences of the shareholders and the size of the company.
The non-competition clause prevents shareholders from engaging in activities that compete with those of the company. This clause aims to protect the company’s interests by preventing shareholders from harming the business by exploiting their knowledge or experience for another company.
When a company is sold, the acquirer may want to obtain all the shares of the company. This situation usually occurs when the acquisition is by international groups. Drag-along rights allow the acquirer to force other shareholders to sell their shares at the same price and under the same conditions.
Tag-along rights allow a minority shareholder to sell their shares at the same price and under the same conditions as the majority shareholders. This clause protects minority shareholders by offering them some protection in case of the sale of the company.
General assembly constitution
The shareholder agreement can also provide specific provisions for the constitution of the general assembly, such as the quorum required for the assembly to be validly constituted or the notice period for convening shareholders to the assembly. These provisions aim to ensure the proper conduct of the general assembly and decision-making.
Veto rights, tie-breaking
The veto rights clause allows one or more shareholders to oppose certain important decisions, even if the majority of shareholders are in favor of these decisions. The tie-breaking clause can be used to resolve situations where the vote is tied at the general assembly. This clause specifies the modalities for breaking the tie in case of equality.
The shareholder agreement can specify rules for representing shareholders at the general assembly, such as the possibility for a shareholder to be represented by a proxy or to vote remotely. This clause aims to facilitate shareholder participation at the general assembly and ensure that all shareholders have a voice in important decision-making for the company.
In conclusion, shareholder agreements are essential documents for governing the relationships among the shareholders of a company. They help clarify the rights and obligations of each shareholder, regulate decision-making processes, and provide mechanisms for resolving conflicts. The provisions that can be included in shareholder agreements are numerous. It is important to draft them carefully to meet the specific needs of shareholders and ensure good governance of the company. For assistance, it is highly recommended to consult a lawyer.