Voting Rights In Shareholder Agreement

In general, most cases are decided by an ordinary decision of the shareholders. This allows the company to work effectively without having to get all shareholders to agree on all matters. However, there may be a list of critical cases that require a special or unanimous decision of shareholders. As a general rule, these are limited to key issues that any shareholder wishes to ensure that he or she has a say, such as the issuance of new shares. The issuance of shares may dilute a shareholder`s stake in the company. The revocation clause allows a signatory to withdraw from the capital if, during the term of the contract (sale of certain assets, termination of a partner,…), one or more events mentioned in the contract occur. The signatories of the contract are required to repurchase the shares of the partner who wishes to withdraw at a price calculated in advance and fixed in the agreement. In our previous brochures on the PNKS (which now become the «PwC Legal Booklets» devoted to shareholder agreements[1], we briefly outlined the main clauses to limit the portability of a company`s shares, maintain the structure of their share capital and facilitate the withdrawal of some of its shareholders in certain circumstances. This explanatory and empirical presentation has a normative impact on some of the most fundamental debates in corporate law. Thus, understanding shareholder agreements imposes two essential distinctions in corporate law: that control of the board of directors should be accompanied by fiduciary duties, while the exercise of contractual rights should not take place, and that shareholders negotiate discretionary «residual rights», while other stakeholders, such as creditors, protect themselves contractually. The extensive use of contractual rights by shareholders requires us to review the type of control on both fronts.

It also raises the fundamental normative question of whether it is desirable for shareholders to contractually redeploy exercise rights that are otherwise related to share ownership and the corporate charter. The main elements you need in a shareholder contract are: As a general rule, an ordinary shareholder decision requires shareholders to have more than 50% of the company`s shares to vote for the deal. This means that a single shareholder who owns 75% of the company`s shares can make the decision itself. In corporate democracy, the standard system for electing directors votes, but shareholders can vote by contract.

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