Shareholder Agreement Luxembourg

Subject to any restrictions on the transfer of shares in the articles, a shareholder of the Company may sell or transfer his shares to third parties. Such a transfer will be made after a resolution of the Directors of the Company, the Seller and the Purchaser (if any) has been passed, the Share Transfer Form has been completed, an applicable stamp duty has been paid, a notice of transfer of shares/lists of shareholders has been submitted to ACRA and the electronic register of members (for private companies) has been updated. In order to avoid conflicts or to obtain a stronger position in a potential conflict between shareholders, it may be advantageous to provide for other mechanisms related to corporate governance, such as.B. the right to appoint or appoint an officer or observer to the board of directors. The latter is a person who is authorized to attend meetings of the board of directors and observe what the members of the board decide and discuss. However, an observer does not have the right to decide. Depending on the situation, the shareholder cannot make use of such a right from the outset, but may use it in the event of a conflict. In an SA, shareholders are not required to disclose their stake in the company. In principle, shareholders can remain anonymous, as the transfer of shares and the identity of the shareholders are not published.

However, the identity of the subscriber of the new shares issued in an SA by the general meeting is recorded in the notarial deed, which is accessible to the public. Although the German Joint Stock Companies Act does not specify specific areas in which the decisions of the board of directors must be approved by the shareholders, the company`s articles of association may provide that all or part of the decisions of the board of directors must be ratified by the shareholders. However, in the case of listed companies, it is quite unusual for the Board of Directors to require its approval or seek ratification of its decisions that do not fall within the scope of shareholders` statutory rights. Companies should identify issues that could attract the attention of activists and identify measures to minimize the risk of being targeted by an activist shareholder, such as: B. : The Shareholders` Act aims, among other things, to strengthen the exercise of voting rights of minority shareholders in listed companies in order to improve the corporate governance of companies. The Shareholders` Act expressly refers to a principle of equal treatment of shareholders.42 This principle is limited to the participation of shareholders in the annual general meeting and the exercise of their voting rights at that meeting.43 In 2016, the German Law on Joint Stock Companies amended the previous rule that a share is in principle entitled to one vote. From now on, the company can provide for different voting rights for different shares. Finally, the clauses for the transfer of voting rights tend to allow shareholders to transfer their voting rights regardless of the title. The validity of these clauses is controversial. Part of the legal literature assumes that such clauses would be illegal because the right to vote would essentially be a prerogative of public policy linked to the status of shareholder and therefore a non-transferable prerogative.

The authors who share this view argue that the right to vote is a complement to the social right and that it guarantees the shareholder remuneration for the risk he takes as a shareholder. They consider that non-transferability is justified by the protection of the shareholder, who would lose the guarantee of protection of his interests in the event of a transfer. The directors/officers are representatives of the Company appointed by the General Meeting of Shareholders and are therefore responsible to the Company for the execution of their mandate and for any failure in the exercise of their functions. Conversely, in a Sàrl, the transfer of shares to third parties requires the agreement of the other shareholders representing at least 75% of the share capital (this can be reduced to 50% of the share capital in the articles of association). We also recalled that in addition to these clauses relating to the capital of the company, there is another basic category of clauses contained in almost all shareholder agreements: clauses on the exercise of power within the company, which in turn are schematically divided into two subcategories, namely: The Companies Act does not provide for specific benefits (for example. B.B votes or additional dividends) for long-term additional votes or dividends. Shareholders, although these facilities may be agreed in a shareholders` agreement or incorporated in the articles of association, or both. In other words, as one author summarizes, “even if it is irrevocable, a voting mandate can still be revoked.” The lawyer will certainly understand the subtle difference that leads some authors[10] to say that “irrevocability is a reality […] because it has a price.” But what about the shareholder who is looking for a pragmatic and effective solution to enforce the agreements entered into by his counterparties under a shareholders` agreement? Shareholders may also individually waive their voting rights or enter into voting agreements under certain conditions, and such waivers and voting rights agreements may be enforceable against third parties.

Specific transfer restrictions may be included in articles of association or contractual arrangements between shareholders, such as.B. Lock-in provisions, pre-emption rights, right of first offer, right of first refusal, labelling/drag rights, etc. It can be effective to include clauses in a SHA or in AoAs that provide for certain consequences if shareholders fail to meet their obligations. This, as mentioned earlier, can be a clause that obliges shareholders to sell their shares. However, such a mechanism can also be a punitive damages clause, which means that in the event of a breach, the shareholder must pay at least a predetermined amount of money, with the advantage that concrete damage does not have to be proven3. Where such a clause is included, it must ensure that the wording is clear as to the circumstances in which it can be activated. Such a clause should not simply provide that a forcible transfer of shares may take place in the event of a material breach of their obligations by a shareholder. It is necessary to define precisely the scenarios that such a material breach entails. In principle, shares may be transferred between shareholders by written agreement and approval of registered shares. Articles of association may limit (but not exclude) portability; Approval requirements can be implemented. Under the Shareholders Act, in addition to the right to ask oral questions at a meeting, shareholders may have the right to ask written questions on agenda items prior to the meeting. If the articles of association of a company so provide, questions may be asked as soon as the notice of the annual general meeting is published.

The Company`s articles of association also provide for the date of registration by which written questions should have been received by the Company.60 It is certain that the members of the Board of Directors must in any event be aware of any participation and of the measures taken by their shareholders. In this context, it remains to be seen whether the Covid-19 pandemic, the climate crisis and the resulting higher priority given to environmental, social and governance (ESG) issues will lead to more activist campaigns. In summary, while drafting a shareholders` agreement may seem tedious, it can establish structural principles for the life of the company or the relationships between shareholders. As a result of the reform, shares may be acquired without the consent of the shareholders with the consent of the transferring shareholder of (i) the other shareholders, (ii) a third party approved by them or (iii) the company itself within a period of three months, which may be extended to six months under certain conditions. The conditions applicable to the determination of the transfer price of the shares must be laid down in the articles of association, failing which the price will be determined by the competent Luxembourg court if the parties do not reach an agreement. In general, there are no restrictions on the transfer of shares, with the exception of those set out in articles of association, shareholder agreements, etc. The clauses of the articles of association which render the shares non-transferable are in practice null and void. However, shareholders control the appointment of the Board of Directors (and thus its composition) by a majority vote of more than 50% of the capital to appoint or dismiss the directors.57 In addition, shareholders representing 10% of the share capital of a company may require the Board of Directors to postpone a General Meeting for a maximum period of four weeks.58 Approval must be given by resolutions of the General Meeting or to the extent that where: who is authorized to do so by the Annual General Meeting. By law by written resolutions of shareholders. . . .


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