Difference Between Company Constitution And Shareholders Agreement
Unlike the standard provisions of the Companies Act 1993, a shareholders` agreement can provide clear guidance to a shareholder who wishes to sell his shares and leave the company. In the absence of clear guidelines set out in a shareholders` agreement, problems can arise between outgoing and remaining shareholders. Even if a tailor-made incorporation contains provisions on outgoing shareholders, these provisions are unlikely to be more than general. A shareholders` agreement can contain and clarify many more details. The articles of association are registered with the Office of Commercial Registers when a company is set up and all amendments thereto must also be submitted to the Office of Commercial Registers within a prescribed period. As a result, the creation of a company is an authentic act and can be appreciated by the public. Such provisions require careful consideration, as it appears to result in a heavy penalty for outgoing employee shareholders who may have invested a great deal of time and energy in the development of a company and who have given up better pay conditions and other benefits that they could have enjoyed elsewhere. Shareholder agreements are more specific rules defined by the specific shareholders of that company. Since there are different people and roles that make up a company, it is important to create the appropriate legal documents to address them: standard constitutions established by business start-up agencies, audit firms or law firms contain various important provisions regarding the internal regulation of a company.
However, most of them do not address many of the domestic regulatory issues that shareholders might consider necessary for the proper functioning of a company by examining the issue in more depth. It is of course possible to « customize » the statutes of a company so that it deals with these issues more comprehensively. In many shareholder agreements, and in particular in shareholder agreements concluded as part of a venture capital investment, different restrictions are common for project promoters, who limit them during the period during which they hold shares in the company and for a period of up to two years thereafter: the articles of association of the company, provided, however, that the directors are able to induce the company to issue shares, including preferred shares, but if the issuance of shares varies from the rights related to an existing class of shares, the approval of at least 75% of the shareholders of that class was required. I also mentioned that the shareholders` agreement and the articles of association should be designed to avoid contradictions. In order to avoid disagreements between the two documents, it is normal to include in the shareholders` agreement a « priority clause » which provides that in the event of a conflict, the provisions of the shareholders` agreement have priority in settling the conflict. . . .
