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  • Cristina Lefter

Shareholders’ Agreements

Shareholders' agreements are legal documents found on the borderline between company law and contract law. They are contractual in nature, but their effectiveness depends in some respects on their compliance with the provisions of Law 31/1990 on companies (Law 31).

The characteristics of shareholders’ agreements could be summarised as follows:

  • They are contractual in nature, which gives the shareholders more flexibility as regards the agreed contractual provisions (including the law applicable to the agreement, which does not have to be Romanian law).

  • They do not have to be published (similar to company articles of association), although they usually contain essential elements concerning the exercise of control in the company and are confidential.

  • They are not regulated as such and their contents is usually determined by practice.

  • They are of unquestionable economic importance, as they provide essential rights for members/shareholders such as the right to participate in company decision-making, participation in the management of the company through the appointment of board members, exit rights i.e. in the case of transfer of shares.

  • They can be concluded both at the time of the company's incorporation and subsequently. Shareholders’ agreements are usually negotiated and concluded in the context of attracting new investors to the company through the sale of a stake or an increase in share capital,

  • Not regulated and not public, shareholders’ agreements may seem curious to new entrepreneurs and even to the courts of law. This may be a disadvantage if a party to such an agreement wants to protect its rights before the Romanian courts. For this reason, usually shareholders' agreements contain arbitration clauses i.e. clauses on the settlement of possible disputes through arbitration - a more costly - but more efficient and confidential way of settling disputes.

The good news is that shareholders’ agreements don't have to be an exotic concept for entrepreneurs but can be used successfully with the guidance of the right lawyer. #lclegalproof

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