What is the Shareholders' Agreement (SHA) in a business sale?
A sell company For many entrepreneurs, a sale is one of the most important decisions in their business. After years of building a strong organization, the sales process often revolves around price and terms. But just as important is the question: how will the collaboration work after the transaction, especially if you remain involved?
If you remain a shareholder, an investor comes on board, or you opt for a partial sale, you will need to deal with a shareholders' agreement, also known as a Shareholders' Agreement (SHA). This document determines how you will proceed together, not just legal, but also strategic and personal.
In this blog, we explain exactly what a shareholders' agreement is, what agreements are laid down in it, and what you should consider when drawing up this document.
What is a Shareholders' Agreement (SHA) in a Business Sale?
A shareholders' agreement is a contract between shareholders that sets out how they will cooperate with each other after the sale of a company.
When you sell your company and do not exit completely, a new situation arises: you get a co-shareholder. This can be a investor to be, a strategic party or a management team (management buy-in or management buyoutFrom that moment on, you not only share the profits, but also the authority and the responsibility.
This is less relevant in a complete transfer. However, if you remain involved after the sale, the shareholders' agreement forms the basis for a clear and lasting partnership.
What agreements are usually recorded in a shareholders' agreement (SHA)?
A shareholders' agreement for a business sale sets out agreements regarding control, share transfers, profit distribution, and future sale dates. The key components are:
Decision-making and control
: Which decisions can you make independently and which decisions require the approval of other shareholders? Consider major investments, new financing, acquisitions or strategic course changes. This determines how much influence you actually retain after the company sale.
Transfer of shares
: What happens if one of the shareholders wants to sell their stake? This often includes provisions such as blocking arrangements, tag-along and drag-along rights, and good leaver and bad leaver clauses. These agreements protect your position in the event of a future sale.
Dividend policy
: Will profits be distributed or reinvested in the business? For you as an entrepreneur, this can make a significant difference in your personal return and cash flow after the transaction.
Exit arrangement
: When and under what conditions will the company be resold? This is especially crucial for private equity projects, as they often involve a clear investment horizon.
Your role after the sale
: Will you remain as director or executive, and for how long? What happens if you want to step down early or if a difference of opinion arises? This component determines how your position and influence within the organization are safeguarded.
The matters in the shareholders' agreement are not standard clauses. They are agreements that directly affect your authority, your returns, and your future as an entrepreneur.
When is a shareholders' agreement drawn up in the sales process?
A shareholders' agreement is usually drawn up after the main terms of the deal have been agreed, but before the final transfer.
In many processes the most important principles are already mentioned in the Letter of Intent (LOI), for example, regarding control, dividends, and a future exit. This is then legally elaborated in a SHA that matches the transaction structure.
For entrepreneurs, this is a crucial moment in the process. Because the pressure to close often increases, it's wise to focus not only on speed but also on the quality of the agreements. An SHA is not an appendix; it forms the foundation for the collaboration after the transfer.
What is the difference between the letter of intent and the shareholders' agreement?
The difference between a letter of intent and a shareholders' agreement is that the LOI sets out the agreements before the company is sold, while the shareholders' agreement governs the cooperation after the sale.
Letter of intent (LOI)
: The letter of intent is a document used in the negotiation phase that outlines the main aspects of the transaction (such as price, structure, and timeline). It is usually largely non-binding.
Shareholders' agreement
: The shareholders' agreement is a legally binding agreement that sets out agreements on control, cooperation, and future scenarios if you remain a co-shareholder after the sale.
What is the role of an SHA extra in a partial business sale (pre-exit)?
A shareholders' agreement is extra important in a partial sale of the company (pre-exit) because you are continuing to build the company together with a new partner.
You cash out part of your assets, but remain involved. This means you invest together, share the risks, and work together toward the next sale. You'll want to be clear upfront about:
- How future investments are financed.
- How to deal with disappointing results.
- What happens when there is a difference of opinion.
- How and when a second exit occurs.
A clear shareholders' agreement provides peace of mind. It allows you to focus on your business, while the agreements behind the scenes are properly arranged.
What is the role of an advisor in a shareholders' agreement (SHA)?
An advisor can help you design the shareholders' agreement not only legally sound, but also strategically sound. A shareholders' agreement may seem purely legal, but its content addresses the core of your deal: decision-making, risk, return, and future. Therefore, it's important that shareholder agreements align with valuation, financing and negotiation strategy.
At Match Plan, we combine strategic M&A advice with in-house legal expertise. This means our lawyers are involved in the process from the outset and work closely with our consultants. Legal decisions are not considered separately from the commercial reality. Everything is considered in a holistic manner, ensuring your interests are not only sound on paper but also proven in practice.
Why choose Match Plan?
Match Plan guides entrepreneurs from initial orientation to the final transfer. As an independent advisor, we combine strategic M&A advice with in-house legal expertise, ensuring your interests are prioritized and all documentation is meticulously documented. What we do for you:
- We offer complete support from start to finish, from the initial strategic exploration to the formal transfer at the notary.
- With over 30 years of experience, we combine in-depth knowledge of business transfers with legal expertise under one roof, ensuring that strategy and contract formation seamlessly integrate.
- Our advisors and lawyers work closely together and provide strategic input on negotiation strategy, transaction structure, risk allocation, and shareholder agreements.
- We work independently and transparently, always putting your goals and interests first in every step of the process.
- We provide peace of mind and clarity by coordinating the entire process, so you can continue to focus on the value and continuity of your business.
Would you like to know what a shareholders' agreement for a business sale looks like in your situation? Feel free to contact us for a no-obligation consultation.
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