Shareholders' agreement: what should it contain? A complete guide

A shareholders' agreement (or anpartshaveroverenskomst for an ApS) is the agreement that governs the relationship between the co-owners of a business. While the articles of association are the company's "constitution", which is public and governs the company externally, the shareholders' agreement is a private document that sets the rules between you as owners internally.

Many founders skip the shareholders' agreement in the excitement of getting started. That is a mistake that can cost the business, the friendship, or both.

Why do you need a shareholders' agreement?

Think of the shareholders' agreement as a "what-if" agreement. It answers questions you hope never arise, but that statistically will:

• What happens if one founder wants to leave the business?
• What happens if a founder dies?
• What happens if you disagree on a major decision?
• What happens if one owner wants to sell to a competitor?
• What happens if a founder does not deliver the agreed work?

Without an agreement, these questions are left to negotiation under pressure, or to the courts. With an agreement, you have the answers ready before the conflict arises.

Shareholders' agreement vs. articles of association

	Shareholders' agreement	Articles of association
Public	Private	Public (CVR.dk)
Binding on	The signing parties	All current and future owners
Content	Detailed internal rules	Minimum structure under the Companies Act
Amendment	Requires all parties' consent (typically)	Requires adoption at a general meeting

Both documents are necessary and complement each other.

The most important elements of a shareholders' agreement

1. Ownership and capital structure

• Who owns what? State ownership stakes precisely
• Is there a difference between voting rights and capital rights?
• Plans for future ownership (employee shares, investor capital)?
• Can shares be split into class A and class B with different rights?

2. Management and decision-making authority

Who decides what? Build a clear hierarchy:

Day-to-day decisions:

• Who is the director/day-to-day manager?
• What can the director decide alone?

Important decisions (require a majority of owners):

• Hiring/dismissal of key employees
• Entering into large contracts (define a threshold amount)

Unanimous decisions (require all owners):

• Sale of the company
• Admission of new owners
• Amendment of the shareholders' agreement

State the voting rules: simple majority, 2/3 majority or unanimity, and to which decisions they apply.

3. Vesting and cliff

If founders receive shares, they should be subject to vesting, an arrangement where the shares are earned over time, as a reward for staying in the business.

Example of standard vesting:

• 4-year vesting with a 1-year cliff
• After 1 year (the cliff) the founder has earned 25% of their shares
• The remaining 75% is earned monthly over the next 3 years

Vesting protects the business against a co-founder leaving early and keeping a large stake.

4. Transfer of shares

What happens when an owner wants to sell? Regulate this carefully:

Right of first refusal

The other owners have the right to buy the shares at the offered price before they are sold to an external party.

Drag-along

If a majority shareholder sells their majority, they can require minority shareholders to sell along on the same terms. Protects the seller against being blocked.

Tag-along

If a large shareholder sells, the minority has the right to sell along on the same terms. Protects the minority against being left with a new, unwanted majority owner.

Consent requirement

Sale to a third party requires the other owners' consent.

5. Departure of an owner (good leaver / bad leaver)

What happens when an owner leaves the business?

Good leaver (voluntary resignation after an agreed period, illness, retirement):

• Buy-back of shares at market value or an agreed method

Bad leaver (breach of contract, competing activity, disappearance):

• Buy-back at a lower price (for example nominal value or acquisition cost)

Define precisely what constitutes a "good" vs. "bad" leaver.

6. Non-compete clauses

Can a departing owner start a competing business straight away?

Shareholders' agreements can contain non-compete and non-solicitation clauses restricting a departing owner from:

• Hiring the company's employees
• Contacting the company's customers
• Starting a competing business

Non-compete and non-solicitation clauses between owners in a shareholders' agreement are, as a starting point, not covered by the Danish employment-clause act (ansættelsesklausulloven). The Supreme Court has held that such clauses between shareholders are assessed under general contract law. If an owner is also employed with a very small stake and limited influence, the clause can nonetheless become subject to the employment-clause act. Non-solicitation clauses can also be affected by the Marketing Practices Act.

7. Dividend policy

When are dividends paid, and in what amounts? State:

• The minimum percentage of profit paid out as dividend
• When during the year dividends are decided
• Any exceptions in the case of reinvestment

Without a dividend policy, the majority owner can control when the minority owner gets money out.

8. Deadlock mechanism

What happens if you are 50/50 owners and cannot agree on an important decision?

Deadlock clauses can include:

• Mediation process (a third party helps resolve the conflict)
• Russian roulette/shotgun clause: Party A offers to buy out B at a price. B can choose to sell at that price or buy out A at the same price.
• Drawing lots on the decision (rare, but used for tied votes)

9. Financing and capital contributions

• Can the company take on new investors? On what conditions?
• Do existing owners have a right to subscribe (anti-dilution)?
• What happens if the company needs additional capital?

10. Termination and sale of the company

• When can the company be sold?
• Does a sale require unanimity or a majority?
• Who negotiates with the buyer?
• Distribution of the sale proceeds

The shareholders' agreement and investors

If you take external capital from investors, they will typically insist on a shareholders' agreement that includes:

• Liquidation preference: Investors have their investment covered before other owners receive proceeds on a sale
• Anti-dilution: Protection against dilution in future capital rounds at a lower price
• Board seats: The right to board representation
• Information rights: The right to ongoing financial information

Professional investors typically have standard terms. Consider legal advice before you sign.

Frequently asked questions

Is a shareholders' agreement mandatory?

No. It is not required by the Companies Act, but is strongly recommended where there is more than one owner.

Can I make a shareholders' agreement without a lawyer?

For simple companies with 2-3 owners and equal ownership, a well-prepared template can form a good foundation. For complex ownership structures, investor agreements or high amounts, legal assistance is recommended.

When should we enter into the shareholders' agreement?

As early as possible, preferably before you formally register the company. The earlier, the easier the negotiation; the more the company has grown, the more the stakes are worth, and the harder the negotiation.

Can we change the shareholders' agreement?

Yes, but it typically requires all parties' consent (or the majority the agreement itself specifies). Changes should always be made in writing.

What happens if we do not have a shareholders' agreement and a conflict arises?

The Companies Act governs the most basic matters, but gives very limited protection in internal co-owner conflicts. In practice it ends in lengthy and costly lawsuits.

Conclusion

A shareholders' agreement is the foundation of the co-ownership partnership. It is not exciting to make, but it is invaluable if at some point you do not agree. Write it while you are good friends and optimistic. That is exactly what makes it effective.

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The content of this article is for guidance only and does not constitute legal advice. Consult a lawyer for advice on your specific situation.