A typical ”drag along” rights model is one in which shareholders, who hold the majority of the shares (over 50%) If you want to sell their shares to a third party, other owners must also agree to sell their shares to the same buyer. In general, companies without minority shareholders are expected to be purchased. The ability to prove that the purchaser can acquire the business on demand without minority shareholders and that individual shareholders cannot obstruct the transaction is a major advantage in the initial acquisition phase. Drag-along rights depart from the right of shareholders to use their shares as they see fit for the benefit of the majority. A shareholders` pact, also known as the Shareholders` Pact, is an agreement between the shareholders of a company that describes how the company should be operated and defines the rights and obligations of shareholders. The agreement also contains information on the management of the company and the privileges and protection of shareholders. It is possible, in a shareholders` pact, to deviate from certain provisions of the Corporations Act relating to the relationship between the parties. For example, shareholders may waive their rights under the Corporations Act or assume obligations that they would not otherwise have on the basis of their position as shareholders. As a startup-based law firm, we had several start-up clients at Nordic Law at the beginning with the recurring question, oldie but goldie – do we really need a shareholder contract (SHA), since we are all good friends and we are all back by far? Without exception, we always advise our start-up customers never to create a business without SHA, let alone a company without sha. With a well-functioning SHA, the founders and shareholders of a startup are able to solve problems upstream, even if these are serious problems, and at best, a SHA minimizes shareholder pressure to focus solely on business development, knowing that the basic rules of the start-up are clear, complete and predictable.

In other words, the road of yellow bricks to success is most often paved with a well-written SHA. During the drafting of the agreement, Sopimustieto will inform you of the effects of the terms and terminology used in the agreement. Of course, no one can be prevented from leaving the country. However, when a shareholder wants to leave, the typical penalty is that he has to sell the shares he owns or some of them, usually at a lower price. If the shares are valuable, each shareholder must at least ask themselves whether they really want to leave. It is important that the shareholders` pact contain clear provisions on the situations in which the shares are to be issued and on the applicable price. In such cases, the shares are usually returned to the company or other shareholders. In this first blog post, originally published as a guest blog post on the ArcticStartup website, we will present some key questions that should always be considered when creating a SHA for a start-up with working shareholders.