Jéssica Chaves Costa
Lawyer at Marcos Martins Advogados
When setting up a new company, the partners end up dedicating their time and efforts solely to the performance of the business in order to allow the company to develop, leaving aside, in the vast majority of cases, the drafting of documents that can establish their own rules in relation to the company that connects them.
However, the adoption of clear rules that reflect the agreement between the partners is of fundamental importance and needs to be encouraged from the outset of each venture. By not adopting agreements that reflect the principles defined by the parties, the partners end up taking an unnecessary risk with regard to the business’s longevity, which tends to increase as the activities prove successful.
In this sense, there is a very relevant shareholder document for setting out a company’s strategic rules, the so-called shareholders ‘ agreement, in the broad sense, also known as the shareholders ‘ agreement or the quotaholders’ agreement, depending on the type of company adopted by the company: joint stock company or limited liability company, respectively.
Unlike the Articles of Association and the Bylaws, the shareholders’ agreement is a legal instrument that makes it possible to define governance and operational rules, including future projections between the shareholders, with the aim of establishing rules and possible premises for solutions in the various cases of conflicts and situations that may arise during the course of the business activity, such as, by way of example, the conditions for the sale of shareholdings and new partnerships.
In this way, the shareholders’ agreement helps to strengthen the mechanisms and structures of corporate governance, which is understood to be the set of procedures, practices, policies and regulations that establish the way a company is run and behaves at the interface between management, shareholders and the business.
The existence and practical effectiveness of a shareholders’ agreement demonstrates greater maturity, professionalism and transparency in the corporate relationship, to the extent that discussions on fundamental issues for the success of the enterprise will be handled with greater responsibility by its shareholders, which, consequently, at the time of any assessment of the business by a potential investor, may be taken into consideration.
Furthermore, it is important to note that this formalization of rules may be confidential, and it is possible to state that the partners’ agreement also differs from the Articles of Association and Bylaws in this respect. Thus, while the latter must be registered with the Board of Trade, the shareholders’ agreement can remain on file at the company’s head office, being known only to the shareholders.
Although it is a corporate instrument used more frequently in large companies, in practice it is also of the utmost importance for all companies, regardless of their size, including and especially family businesses, which undergo changes in their corporate structure as new generations emerge.
In family businesses, therefore, the purpose of the shareholders’ agreement is to stipulate parameters for the entry of new heirs, minimizing possible conflicts and perpetuating the company’s culture and DNA for future generations. It is therefore a document that disciplines relations between the partners and the family, establishing rules of an ethical and moral nature that must be complied with by all the parties to the agreement and imposed on other family members, thus improving administrative practices and consolidating professional management of the company.
Finally, it is important to point out that the shareholders’ agreement takes into account a series of particularities of the company and the interests of its shareholders, and it is essential that it is coordinated by a specialized professional who has sufficient experience to conduct complex discussions with a variety of interests, clarifying the limits of the law and the different forms of provisions on the various issues.
Is this subject of interest to you? The team at Marcos Martins Advogados has extensive experience in drafting shareholders’ agreements for companies of all sizes in various locations, and is qualified to meet all demands aimed at guaranteeing the highest standard of governance for your company.
About Marcos Martins Advogados:
Founded in 1983, Marcos Martins Advogados is highly regarded in the areas of Corporate, Tax, Labor and Business Law. Based on values such as commitment, ethics, integrity, transparency, responsibility and the constant specialization and improvement of its professionals, the firm positions itself as a true partner for its clients.
