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The importance of the Shareholders’ Agreement

There is no doubt that the adoption of corporate governance practices is the best way to minimize risks of conflicts in the communications and relationships of companies. They reflect years of development of a modus operandi by global and local companies, aiming to improve transparency and maintain equity in the disclosure of information among managers, stakeholders and control bodies, as well as to add value to companies in the long term. Therefore, corporate governance practices and principles should be adopted not only by publicly-held companies, but also by all companies.

It was in this spirit of establishing rules and guidelines that the Shareholders’ Agreement was created, a mechanism that aims to discipline the individual interests of shareholders. It is a clear and comprehensive agreement that establishes several points not addressed in the company’s bylaws. A Shareholders’ Agreement has three basic purposes:

  • Control: related to the formation of control blocks, it usually establishes rules for amendments to the bylaws, capital increase, etc.;
  • Protection: aims to protect minority shareholders against potential abuses by controlling shareholders, for example, in terms of voting rights. It establishes mechanisms to inspect the acts and business transactions performed by the Company’s management;
  • Mutual understanding: aims to bring closer minority and controlling shareholders through common interests, thus providing uniformity to voting at the shareholders’ meeting and preventing disagreements between the shareholders.

In addition, the Shareholders’ Agreement also addresses specific subjects, with the goal to align the interests of shareholders, and to reflect the best business management practices, so as to contribute to good corporate governance in companies.In order to help you better understand, we elaborated the following list of topics that are usually addressed in the Shareholders’ Agreement when executed by Brazilian publicly-held companies:

  • exercise of preemptive rights in the subscription to new shares;
  • non-subscription in capital increase;
  • plans for the company’s future (expansions, creation of economic conglomerates);
  • investments in the capital stock;
  • auditing accounts;
  • confidentiality;
  • succession;
  • disability (total or partial);
  • bonus and vacation;
  • division for heirs;
  • limitation of personal liability for company’s debt;
  • business trips;
  • definitions of the client portfolio;
  • withdrawal of partners;
  • non-competition clauses;
  • benefits such as room, car, etc.

There are also other manners and documents that help minimize the risks and add value to a company’s controls, namely: code of ethics (a mandatory document for publicly-held companies that establishes a set of rights, duties and responsibilities for all stakeholders); information disclosure and investor relations policy; risk management policy; contribution and donation policy; and policy for combating illegal acts.

Christian Bercht
Analyst at LEAD
+55 11 3529-3889

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