TL;DR
- The SHA is the most important document of the company.
- Be aware that it will likely be amended and replaced with each financing round.
- Investor protections and transfer mechanics should be clearly structured to ensure enforceability and alignment between shareholders.
- Book a free call.
A shareholders’ agreement (SHA) is a private contract between shareholders that defines ownership, control, and how a company is run.
What is a shareholders’ agreement (SHA)?
A shareholders’ agreement (SHA) is a legally binding contract between all shareholders (and often the company) that regulates how decisions are made, how shares can be transferred, and how conflicts are handled.
While not required by law, it is one of the most important documents for startups and growing companies. It complements the Articles of Association and becomes essential once multiple founders or investors are involved.
At LEXR, we typically structure SHAs for startups and scale-ups, particularly in Switzerland, ensuring they align with investor expectations and future financing rounds.
Why is a shareholders’ agreement important?
The SHA creates clarity and reduces risk. Without it, situations like a founder leaving, a new investor joining, or a company sale can quickly lead to disputes.
It ensures fair treatment of shareholders, protects minority and majority interests, and defines clear rules for decision-making. It also introduces key legal mechanisms that control ownership and exits.
When do I need a shareholders’ agreement?
A shareholders’ agreement should be implemented as soon as there is more than one shareholder, typically at incorporation.
It is also not a static document. In practice, it is renegotiated and replaced during each financing round, as new investors require updated rights and protections.
Key provisions in a shareholders’ agreement
Transfer mechanics: controlling ownership
The SHA defines how shares can be sold and who is allowed to become a shareholder.
Right of First Refusal (ROFR): Gives existing shareholders the right to buy shares before they are offered to third parties.
Drag Along: Allows majority shareholders to force minority shareholders to sell their shares so that a buyer can acquire 100% of the company.
Tag Along: Allows minority shareholders to join a sale initiated by majority shareholders, ensuring they are not left behind.
Founder protections: vesting, IP, and non-compete
Founder-related clauses protect the company from early departures and misaligned incentives.
Vesting: Ensures founders earn their shares over time instead of receiving full ownership upfront.
IP assignment: Guarantees that all intellectual property created by founders belongs to the company.
Non-compete and non-solicitation: Prevent founders from competing with the business or taking clients and employees.
Governance: decision-making and control
The SHA defines how the company is managed and who controls key decisions.
This includes board composition, voting thresholds, and a clear consent catalogue for major actions such as fundraising, asset sales, or budget approvals.
Operational clauses: stability and alignment
Operational clauses ensure long-term stability between shareholders.
Confidentiality: Protects sensitive company information.
Leaver provisions: Define what happens if a shareholder exits the company.
Amendments: Regulate how the agreement can be changed, especially in financing scenarios.
Shareholders’ agreement: If there is more than one shareholder, a structured SHA should always be in place to define ownership, governance, and transfer rules.
Core clauses: Every SHA should include Tag Along, Drag Along, ROFR, and clearly defined purchase options for trigger events such as a founder leaving.
Founder setup: Ensure vesting, IP assignment, and non-compete provisions are properly defined to protect the company long-term.
Transfer restrictions and consent: Clearly define how shares can be transferred and under which conditions shareholders must approve a transaction.
Leaver mechanisms: Define how shares are handled when a shareholder exits, including valuation and transfer rules.
Shareholder consent catalogue: Clearly define which major actions—such as disposals, financing, or budgeting—require shareholder approval.
How do I get this done?
Set up your first SHA with our flat-fee package for shareholder agreements.
Draft and negotiate your SHA during your financing round with us. Take a look at our services and book a free call.
FAQs
What is a shareholders’ agreement (SHA)?
A shareholders’ agreement is a private contract that defines how a company is run, how shares can be transferred, and what rights and obligations shareholders have.
When should a startup create a shareholders’ agreement?
As soon as there is more than one shareholder, typically at incorporation. It is usually updated during each financing round.
What is a Drag Along clause?
A Drag Along clause allows majority shareholders to force minority shareholders to sell their shares in a company sale.
What is a Tag Along clause?
A Tag Along clause allows minority shareholders to join a share sale initiated by majority shareholders.
What clauses should be in a shareholders’ agreement?
Key clauses include vesting, board composition, ROFR, Drag Along, Tag Along, IP assignment, non-compete, and clear rules for amendments and share transfers.