Shareholders’ agreements are contractual arrangements made between the shareholders of a company. They are used to govern the relationships between shareholders and clarify the rights and obligations of each party in specific situations such as the transfer of shares, succession, or profit distribution. In Switzerland, shareholders’ agreements are common and can be tailored to the specific needs of each company.
Signing a shareholders’ agreement is crucial for preventing conflicts among the various shareholders of a company. It is especially recommended to clarify situations when multiple parties are involved, notably for a public limited company (SA). However, such agreements are not regulated by law, and relationships vary depending on the company. Therefore, there is no standard contract. Nonetheless, it is advisable to seek the advice of a competent lawyer when drafting this contract.
In this text, we will examine some common clauses found in shareholders’ agreements in Switzerland.
Right of purchase and pre-emption, purchase obligation
The right of purchase and pre-emption allows a shareholder to buy another shareholder’s shares. The purchase right 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 pre-emption clause allows existing shareholders to buy the shares of a shareholder who wishes to sell to a third party. Lastly, the purchase obligation forces a shareholder to sell their shares to another shareholder or the company under specific conditions, such as non-compliance with commitments or termination of employment.
Call option
The call option allows a shareholder to buy their shares from a third-party acquirer if certain conditions are met. For example, if a third party acquires a majority stake in the company, minority shareholders can exercise their call option to reclaim their shares. The call option must be specified in the shareholders’ agreement, including the conditions and deadlines for exercising it.
Voting type
The shareholders’ agreement can specify the type of voting used during general meetings, such as one vote per person or voting by shares. One vote per person means each shareholder has one vote regardless of the number of shares they own. Voting by shares allows shareholders to vote based on the number of shares they hold. The choice of voting type depends on the preferences of the shareholders and the size of the company.
Non-compete clause
The non-compete clause prevents shareholders from engaging in activities that compete with the company. This clause aims to protect the company’s interests by preventing shareholders from using their knowledge or experience to benefit another business.
Drag-along rights
When a company is sold, the buyer may wish to acquire all the company’s shares. This situation typically occurs during acquisitions by international groups. Drag-along rights allow the buyer to force other shareholders to sell their shares at the same price and under the same conditions.
Tag-along rights
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 security in case of a company sale.
General meeting provisions
The shareholders’ agreement can also include specific provisions for the constitution of the general meeting, such as the quorum required for a valid meeting or the notice period for calling shareholders to the meeting. These provisions ensure the proper conduct of the general meeting and decision-making process.
Veto rights and tie-breaking
The veto rights clause allows one or more shareholders to oppose certain major decisions, even if the majority of shareholders are in favor. The tie-breaking clause can be used to resolve situations where there is a tie vote at the general meeting, specifying how to break the tie.
Representation
The shareholders’ agreement can specify rules for shareholder representation at the general meeting, such as allowing a shareholder to be represented by a proxy or vote remotely. This clause aims to facilitate shareholder participation in the general meeting and ensure all shareholders have a voice in important company decisions.
Shareholders’ agreements are essential documents for governing the relationships between a company’s shareholders. They clarify the rights and obligations of each shareholder, regulate decision-making processes, and provide mechanisms for conflict resolution. The provisions that can be included in shareholders’ agreements are numerous and must be carefully drafted to meet the specific needs of the shareholders and ensure good corporate governance. It is strongly recommended to consult a lawyer to help draft these agreements and ensure all legal requirements are met.
