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A company is organised primarily through its Articles of Association, the provisions of which must necessarily have met with a unanimous consensus among the shareholders or members.
However, it is not uncommon for shareholders or members of the same company to have different needs and interests on certain issues. This explains the conclusion of extra-statutory agreements, such as shareholders’ pacts, between a group of shareholders or sometimes all of them, to govern and organise the management of the company, in order to meet the expectations of certain shareholders (majority shareholders wishing to retain control or minority shareholders wishing to strengthen the protection of their rights, etc.).
These agreements are subject to the fundamental principles of contractual law, which explains their hidden nature:
➢ They are not subject to mandatory publication like the company’s articles of association;
➢ In principle, they bind only their signatories, and the company is not bound by them;
➢ They may be for a fixed or indefinite period; etc.
Depending on the needs of the partners, the agreement may be more or less broad or more or less complete, but in principle it must comply with the Uniform Act on Commercial Companies and Economic Interest Groupings (AUSCGIE), which expressly recognises its validity in article 2-1. Unlike the articles of association, the shareholders’ agreement is not binding and is confidential (with respect to third parties). Subject to compliance with the non-derogable provisions of the AUSCGIE and the provisions of the articles of association, the general purpose of the shareholders’ agreement is to organise:
➢ The relations (particularly financial and political) between the shareholders;
➢ The composition of corporate bodies
➢ The conduct of the company’s business;
➢ Access to capital;
➢ The sale of company shares.
Various clauses can be included and negotiated in the agreement between the shareholders or partners to protect the interests of each party, as grouped into the following broad categories (not exhaustive):
➢ Organisational and governance clauses;
➢ Share transfer clauses
➢ Shareholder/partner protection clauses;
➢ Financial clauses;
➢ Clauses relating to the obligations of the parties;
➢ Dispute resolution clauses;
➢ Exit clauses.
Interest in these agreements is growing in our jurisdictions, particularly in areas of activity that lead to numerous capital partnerships between partners who do not have the same interests or the same concerns. If properly drafted, they can provide protection against the many difficulties that can arise during the life of the company.