Corporate Law
What Must Be Included in a Shareholders' Agreement for Owner-Led and Growth Companies?
A complete guide to shareholders' agreements for entrepreneurs and owner-led companies: drag-along, tag-along, valuation clauses and how to avoid costly shareholder disputes.
Why is the Swedish Companies Act not enough?
Many founders and business partners assume that the Swedish Companies Act (aktiebolagslagen) offers sufficient protection if the relationship becomes strained. In practice, the Act is designed to protect minority shareholders and creditors – not to resolve commercial deadlocks in an owner-led company. Without a shareholders' agreement, a shareholder may, for example, stop working in the business yet retain their entire shareholding and right to future dividends, or sell their shares to an outside competitor.
The five key provisions of a modern shareholders' agreement
- 1.Governance and qualified majority (reserved matters). With 50/50 ownership, deadlock arises easily when the parties disagree. With uneven ownership, say 70/30, the minority shareholder instead risks being overruled. The agreement should contain a clear list of strategic decisions requiring unanimity or a qualified majority – such as new share issues, major investments, a change in the nature of the business, or the setting of the CEO's remuneration and dividends. Note that, under Swedish law and the company-law principle of separation, a shareholders' agreement binds only its parties contractually – not the company or third parties. It should therefore be combined with a clear liquidated damages (penalty) clause and aligned with the pre-emption or right of first refusal clauses in the articles of association, so that transfer restrictions also take effect under company law.
- 2.Duty to work, good leaver and bad leaver. In founder-led companies, value is often directly linked to the shareholders' operational contribution. By tying shareholdings to employment through good leaver and bad leaver provisions, you ensure that a shareholder who resigns early or breaches the agreement must offer their shares to the other shareholders – often at a discounted valuation in the event of breach (bad leaver).
- 3.Drag-along and tag-along rights. Drag-along protects the majority shareholder on a future exit: if a buyer wishes to acquire 100 per cent of the company, a minority shareholder cannot block the transaction and must sell on the same terms. Tag-along protects the minority: if the majority shareholder sells their stake, the minority is entitled to join the transaction at the same price per share.
- 4.Valuation clause on compulsory transfer. The most common cause of protracted disputes between shareholders is not whether someone should be bought out, but at what price. A sound shareholders' agreement sets out in advance how the company is to be valued – for instance an EBITDA multiple, net asset value or valuation by an independent valuer – sparing the parties a costly valuation dispute.
- 5.Non-compete and non-solicitation. To protect the company's client relationships and key people, the agreement should prevent shareholders from carrying on competing business or soliciting colleagues while they hold shares and for a transitional period after exit. The restricted period must be reasonable under Section 38 of the Swedish Contracts Act – normally 12 to 24 months after departure – for the restriction to be upheld.
How Martiq works with shareholders' agreements – at a fixed fee
A shareholders' agreement should not be an off-the-shelf template, but nor should it involve an unpredictable cost. At Martiq we draft and renegotiate shareholders' agreements under our Project & Fixed Fee model. We begin with a joint session with the shareholders, identify your commercial objectives and deliver a bespoke agreement within a cost framework agreed in advance.
Read more about how we work or contact us for a no-obligation conversation.