Contributed By CHSH Cerha Hempel Spiegelfeld Hlawati
If the shares in a company are not held by a single shareholder, but by two or more shareholders (whether this is a joint venture, private equity or other shareholder structure), it is very common to stipulate a governance structure among unaffiliated shareholders that goes beyond the protection and instruments afforded under statutory corporate law. Minority shareholders in particular will typically seek to improve their position towards majority shareholders by ensuring certain additional governance, financial and other rights of participation.
Typically governance documents include a shareholders' agreement, the articles of association themselves (stipulating rights in the articles of association may have some benefits from an enforcement perspective but at the same time means that they will be disclosed and available to the general public through the companies register) as well as by-laws for the management board (and the supervisory board and/or advisory board, if any).
In general, governance documents frequently contain rights to appoint and dismiss members of the supervisory and/or management board (and/or advisory board, if any), a catalogue of reserved matters with veto rights or qualified majorities, restrictions on dealings with shares (typically rights of first refusal, tag-/drag-along rights and/or a lock-up), profit distribution, anti-dilution, escalation/deadlock clauses, exit/termination rights (including also put and/or call option rights) as well as reporting and access to information rights, or any combination of the above. In addition, financing commitments between shareholders to provide the company with further equity and/or shareholder loans are sometimes agreed.