Where a private limited company has several shareholders, the relationship between these shareholders is often set out in writing in a shareholders’ agreement.
Shareholders’ Agreement
There are no specific rules governing a shareholders’ agreement. Unless there is a breach of the articles of association of the private limited company, the law and/or public policy, shareholders may agree, in accordance with the principles of reasonableness and fairness, on whatever they deem appropriate. Setting out these matters in a private shareholders’ agreement offers much greater flexibility compared with provisions laid down in the articles of association. After all, the articles of association may only be amended by means of a notarial deed.
Matters that are typically set out in a shareholders’ agreement, for example, include:
- the dividend policy;
- agreements concerning the functioning of the company’s board (though this may, of course, also be set out in separate board regulations);
- co-sale rights and obligations;
- non-competition clause;
- relationship clause;
- confidentiality clause.
Shareholders
As the name of the agreement suggests, a shareholders’ agreement involves the shareholders of the private limited company. These shareholders may be natural persons, but are often (also) private limited companies. Where the shareholders are private limited companies, some of the provisions in the shareholders’ agreement will usually also apply to the shareholder(s) and/or the director(s) of those private limited companies.
This can be achieved by having the shareholder(s) and/or director(s) become a party to the shareholders’ agreement. They are then named as a party to that agreement and sign it in that capacity.
Extension of the scope
In a recent case The Overijssel District Court has adopted a different approach. This concerns a private limited company (BV) whose shares are held by other private limited companies. The shareholders’ agreement contains a clause extending its scope. Under this clause, the shareholders must impose on their shareholder(s), director(s), authorised signatory(ies) and persons authorised to represent the company the obligations arising from the shareholders’ agreement.
One of the private limited companies failed to do so, and its director is leaving to join a competitor. This constitutes a breach of the non-competition clause and the client retention clause in the shareholders’ agreement. The Court confirms that the director cannot be held responsible for this. After all, he was not bound by the shareholders’ agreement. The shareholder/private limited company is, however, rightly criticised for failing to impose the obligations under the shareholders’ agreement on its director.
Fine
The private limited company is therefore rightly imposing the penalty on its shareholder, as provided for in the shareholders’ agreement in the event of a breach of the obligations set out therein. The shareholders’ agreement provides for a penalty of €100,000 per breach. The Court reduces this penalty to €50,000. In doing so, it takes into account that the €100,000 penalty in the shareholders’ agreement relates to multiple breaches. Furthermore, it is significant that the shareholder/private limited company has not been a shareholder for some time and that it has neither been alleged nor established that the failure to fulfil the obligation was intentional.