I have debated the Constitution at length because, in my experience, there is often a lack of understanding of the role and importance of building a business. Even if a shareholder pact is reached, the Constitution continues to play an important role in a company`s internal regulation. In practice, you will find that it is customary, when creating a shareholders` pact, to amend the Constitution that was adopted at the time of its creation or to frequently replace these provisions of the Constitution so that they comply with the provisions of the shareholder contract which concern the internal management of a company. It is important that the shareholder contract and the Constitution be developed in such a way as to avoid inconsistencies between the two documents. Situations in which inconsistencies appear are taken into account in section 8. This article does not comprehensively address all possible concepts and variations of a SHA, but those that are most used. ATS should ideally be closed when setting up a company between the parties intending to create it and be their original shareholders, although the SHAs may be closed after the creation and operation of a business. Specific transactions or the needs of different internship investors often require different conditions and are likely to be the subject of negotiations and possible further changes. In the case of companies with different types of shares, changes in concepts may also occur, since different classes of shares have different rights and obligations, normally defined in a company`s statutes; However, all shareholders, regardless of class, are generally tied to a SHA.
This section does not take into account the laws of a particular jurisdiction. Businessmen who run a business through a registered company (often at a relatively low cost obtained from a corporate training agency) often do not fully understand the purpose or effects of the Constitution or the differences between the Constitution and a shareholder pact. In the event of a voluntary transfer, the selling shareholder must ensure that the terms of the takeover offer are extended to other shareholders in proportion to their respective shares. The rights of the tag along exist to protect minority shareholders, so that a majority shareholder, when it sells its shares, grants other shareholders the right to join the transaction. Another alternative is mandatory conciliation. A compromise clause in a shareholders` pact may provide that some, if not all, disputes adjudicating under the shareholders` pact may be referred to an external arbitrator. The main advantage of conciliation as a means of dispute resolution is not cost or speed, but confidentiality. Arbitration proceedings take place behind closed doors, when most court proceedings are tried publicly in the context of public order and can indeed be made public well before a court hearing. A SHA will generally indicate the number of original board members (and often their names and other details) and sometimes the rights of some shareholders to appoint a certain number of board members. Other shareholders, without the right to appoint directors, must vote in accordance with the company`s by-law. A merger or takeover usually triggers a drag-along right, as buyers generally seek full control of a business. Drag-along rights help eliminate minority owners and allow the sale of 100% of a company`s securities to a potential acquirer.
Drag along rights are supposed to protect the majority shareholder. However, drag along rights also benefit minority shareholders because they require that the price, terms and conditions of the sale of shares be the same for all shareholders, which may allow minority shareholders to achieve terms of sale that might otherwise be inaccessible.