Shareholders’ agreements

Te bylaws of a LLC also state much on the rights and duties of shareholders. An important question therefore concerns the question of disparity between a shareholder agreement and the bylaws. Are such dissenting agreements still valid? The answer is: usually they are. The common thread in the case law of the Supreme Court of the Netherlands is that shareholders can conclude such agreements in which they can voluntarily limit their rights deriving from the bylaws. Some rules in these bylaws have a nature of public order and those cannot be altered by a shareholders agreement. One example of this concerns derogation from the statutory goal of a corporation, which is not allowed.

The content of a shareholder agreement

Shareholder agreements can be used, among others, to protect minority shareholders. This is done by giving those shareholders a veto right on certain clearly enlisted topics. It can also be arranged that the minority shareholders have to cooperate when a majority shareholder wants to accept a takeover bid. On the other side of the medal it can also be arranged that a minority shareholder can sell its shares under the same conditions as a majority shareholder, when the latter makes a sales deal on his shares. This is a so-called ‘drag along, tag along, clause.

Smaller LLC’s consist mostly out of persons which are active together and also are shareholder. These shareholders have an interest in a good relation with the fellow shareholders and to keep them aboard. A shareholder agreement can arrange the 

conditions under which a shareholder can depart from the corporation. With the so-called ‘good leaver, bad leaver’-clause it can be arranged that a shareholder receives less profit when his departure is culpable. Such a clause enlarges the threshold to leave, but can also form an obstacle when the cooperation fails. Lastly, consider a dispute resolution in your bylaws or shareholder agreement. It is advisable to make clear agreements on this.

Management agreement LLC

There are countless other matters which require clear agreements. How is the management fee determined for those shareholders which also work at the corporation? Does a non-competition clause apply when a partner departs? How are deadlocks between shareholders broken? How will be decided in a case where all parties agree that the cooperation has to be terminated, but do not agree on who takes all shares?

Rational dividend policy

The dividend policy is mostly arranged in the shareholders agreement. Although this can also be arranged in the bylaws of a corporation since the introduction of the Flex-LLC in October 2012, this is a matter that often is arranged by a shareholders agreements because such agreements can be altered more quickly.

Alignment of shareholders agreement and bylaws

With the conclusion of important agreements it stays advisable to ask yourself whether these agreements should not also be aligned with the bylaws. This often is avoided, arguing from a cost-benefits perspective, but when an attorney also plans the change of the bylaws when construing a shareholders agreement, this can be arranged fairly quickly by a notary. This can save costs in the end.

More information

Our attorneys have experience for many years with the conclusion of shareholder agreements and bylaws. Contact us for more information, we are pleased to exchange ideas with you.