Shareholders can determine which acts or omissions trigger an automatic transfer and, as long as the SHA is clearly defined, they are binding. Percentage dilution occurs when an existing shareholder does not acquire the number of newly issued shares needed to maintain its current proportionate ownership (for example. B if a shareholder currently owns 10% of the shares in a company, he must acquire 10% of the newly issued shares to retain his relative ownership). Dilution protection clauses exist to protect outside investors and are often to the detriment of founders, previously unprotected outside investors or other shareholders. They are not ideal for non-beneficiaries of anti-dilution provisions, but the reality is that most serious and experienced investors will expect protection against dilution. If you already have an agreement, it may be time to check if it plans for situations that could change the value of your investment in the business. Shareholder agreements should be updated when circumstances change. On the other hand, it is possible to include provisions to protect majority shareholders, for example to prevent minorities from blocking important decisions and the company from stagnating. In addition, the “Drag Along” provisions will normally be operational when an offer to purchase all the shares of a company is made and the majority shareholders wish to accept this offer. These rights allow the majority to force the holders of the remaining shares to accept the offer on the same terms so that they do not thwart the deal. Some people who have a shareholders` agreement will never have to rely on it, but there will be many more cases where shareholders wish they had taken the time to make a proper deal. As a rule, it is better to conclude a shareholders` agreement when creating the company and issue the first shares.
In fact, it can be a positive exercise to ensure that there is a common understanding of shareholders` expectations of the company. At this stage, shareholders should, as far as possible, have a similar opinion on what they expect and receive from the company. If the differences between investors are too strong at this stage to constitute a shareholders` agreement, it will no doubt warn that warning bells about the nature of their future employment relationship will ring. Participation rights allow a majority shareholder to force minority shareholders to sell a company. The shareholder who carries out the towing must give the minority shareholders the same price and conditions as any other seller. While the articles of association and company law are, to some extent, useful to the company, a fully thought-out and well-crafted shareholders` agreement can serve as protection and offer shareholders increased protection against such scenarios.. . .