Shareholders’ agreements are contractual arrangements established between the shareholders of a company to govern their relationships and clarify their rights and responsibilities in specific situations, such as the transfer of shares, succession, and profit distribution. In Switzerland, these agreements are commonly used and can be adapted to the individual needs of each company.
Signing a shareholders’ agreement is of paramount importance to prevent conflicts between the various shareholders of a company. Particularly for joint-stock companies, it is advisable to clarify the relationships between stakeholders. However, unlike other legal documents, Swiss law does not regulate shareholders’ agreements, and there is no standard contract. The terms of the agreement can vary according to the specific needs of each company. Therefore, it is recommended to consult a competent lawyer to develop a personalized and tailored shareholders’ agreement, taking into account the particular circumstances of each situation.
We will explore in this text some common clauses that can be found in shareholders’ agreements in Switzerland.
Preemptive rights and right of first refusal, purchase obligations
The preemptive rights and right of first refusal clause in Switzerland allows a shareholder to buy back the shares of another shareholder. The preemptive rights clause requires that if a shareholder wishes to sell their shares, they must first offer them to the company or other shareholders before selling them to a third party. The right of first refusal gives existing shareholders the option to buy shares from a shareholder who wants to sell them to a third party. Finally, the purchase obligation can be included to require a shareholder to sell their shares to another shareholder or the company in specific situations, such as non-compliance with commitments or cessation of duties.
The buyback rights provisions grant a shareholder the option to repurchase their shares from a third-party buyer, under certain conditions. For example, if a third party acquires a majority stake in the company, minority shareholders can exercise their buyback rights to recover their shares. The shareholders’ agreement must include clear provisions on buyback rights, as well as the criteria and deadlines for exercising them.
Type of voting
The shareholders’ agreement can provide the voting method to be used during general meetings, such as per capita voting or voting by shares. Under the per capita voting system, each shareholder has one vote, regardless of the number of shares they hold. On the other hand, voting by shares allows shareholders to vote proportionately to the number of shares they own. The choice of voting method will depend on the preferences of the shareholders and the size of the company.
The non-competition clause prohibits shareholders from engaging in activities that compete with the company. This measure aims to preserve the interests of the company by preventing shareholders from using their knowledge or experience to benefit a competing company, which could potentially harm the company.
When a company is sold, the buyer may seek to obtain all the shares of the company, especially in the context of acquisitions by international groups. Drag-along obligations, commonly called “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, also called exit rights, allow a minority shareholder to sell their shares under the same conditions and at the same price as the majority shareholders. This clause provides protection for minority shareholders in the event of a sale of the company.
General assembly formation
The shareholders’ agreement may include special provisions concerning the convening of the general assembly, such as the required quorum for a valid constitution or the notice period for calling shareholders to the assembly. These provisions aim to ensure the smooth running of the general assembly and appropriate decision-making.
Veto rights, tie-breaking
The veto rights clause grants one or more shareholders the power to oppose certain important decisions, even if the majority of shareholders are in favor of these decisions. In case of a tie in voting at the general assembly, the tie-breaking clause can be put in place to determine the tie-breaking procedures in such situations.
The shareholders’ agreement can state the rules regarding shareholder representation at the general assembly, such as the possibility for a shareholder to be represented by an agent or to vote remotely. This provision aims to simplify shareholder participation in the general assembly and ensure that all shareholders have a say in making important decisions for the company.
Essential agreements to frame the relationships between company shareholders
In summary, shareholders’ agreements are essential arrangements for framing the relationships between the shareholders of a company. They offer the opportunity to clarify the rights and obligations of each shareholder, regulate decision-making processes, and provide mechanisms to resolve potential conflicts. The provisions that can be included in a shareholders’ agreement are diverse and varied. It is crucial to carefully develop them to meet the particular needs of the shareholders and ensure good governance of the company. It is therefore recommended to consult a lawyer to benefit from tailored, professional guidance and advice.