Until the battle separates us….
In the world of small and medium enterprises, shareholders, whether as formal directors or informally, are often actively involved in the day-to-day business of the company. Most of the time that’s a plus. However, sometimes things do not go to plan. For instance, shareholders might disagree about the policy being pursued, or about dividend payments or the need for a capital contribution. Unfortunately, we encounter this all too often in our daily practice.
First: Prevent disputes; protect the company
It should be emphasized that it is crucial to properly regulate the relationship between shareholders and to do so not only in the Articles of Association (Statuten), but also in a shareholders’ agreement. Issues such as decision-making, dividend policy, non-competition clauses or dispute resolution are of great importance. After all, how do you deal with each other as shareholders if mutual disputes arise? Not something you want to think about when you start a company together, but we still advice you to do so.
The comparison with prenuptial agreements is a valid one. You agree these when the relationship is good, for the situation that this no longer is the case; you protect each other; now for then. As a shareholder, you should do exactly the same. More importantly, you should also protect the company. After all, a dispute between shareholders (especially in family businesses) can mean the end of the company. That would be very unfortunate.
Secondly: dispute resolution arrangements
The law provides a number of dispute arrangements specifically for shareholders, but it is no luxury to stipulate your own arrangements. For example, to arrange that disputes should be resolved through binding advice or arbitration in order to avoid going to court. It can also be arranged that in case of a dispute one shareholder must offer his shares to the other shareholder and stipulate how the value of the shares is determined. These things are best agreed on in advance. Having such discussions when issues between shareholders have arisen is asking for problems. Realize, however, that having a good dispute resolution system does not guarantee a flawless resolution of disputes.
Sometimes going to court is inevitable, because – for example – one of the parties does not stick to the agreements. However, a judge will not simply ignore those agreements.
In summary, with a good dispute resolution system on paper, an unnecessary battle can be avoided.
Would you like to have more information about this subject? Then please contact us. We’re happy to assist you.