Corporate & governance
A shareholder agreement should help owners make decisions together and provide a workable route when they disagree. We advise majority investors, minority shareholders, founders and family businesses.
Scope of our advice
Reserved matters, funding obligations, information rights, transfers, pre-emption, drag-along and tag-along rights need to fit the company’s articles. German formal requirements may affect agreements linked to GmbH share transfers.
What needs attention
A veto that protects an investor can also block ordinary business. Deadlock and exit provisions should be tested against realistic disagreements, funding shortfalls and valuation disputes.
Control, funding and a workable exit
The agreement should distinguish everyday management decisions from matters requiring shareholder approval. Reserved matters, information rights and budgets must fit the size and pace of the business. A minority investor may need protection against dilution or related-party dealings without acquiring a veto over every routine purchase. We compare the shareholders’ agreement with the articles and management rules so that voting thresholds, representation and dispute mechanisms do not conflict.
How the legal work is organised
Funding and exit provisions deserve practical testing. What happens if only one shareholder can provide further capital, a founder stops working or an owner receives an attractive offer? We analyse pre-emption, transfer restrictions, valuation, drag-along, tag-along and deadlock mechanisms against these scenarios. A provision that appears balanced on paper can become coercive where one party has much greater access to finance. Formal requirements and the enforceability of connected transfer obligations are examined before the parties sign or amend the documents.
Four practical examples
Illustrative scenarios explaining typical legal issues; these are not statements about specific client mandates.
Minority investment
An investor acquires 20 per cent. We define information rights and reserved matters without requiring approval for every operational decision.
Practical approach. Specify the information to be delivered, its frequency and confidentiality safeguards. The approval list should focus on changes to the investment risk, with sensible thresholds for ordinary operations and urgent decisions.
Founder departure
One founder leaves shortly after investment. We review vesting, valuation and transfer mechanisms, including applicable formalities.
Practical approach. Departure provisions should distinguish different reasons for leaving and avoid unclear valuation shortcuts. Employment consequences, share-transfer obligations and the treatment of unpaid contributions require coordinated drafting.
Deadlocked owners
Equal shareholders cannot agree a budget. We develop escalation, interim funding and exit routes that protect the operating business.
Practical approach. An escalation process needs deadlines and an interim operating rule. A buy-sell mechanism should be assessed for financing feasibility, information asymmetry and its effect on employees and key contracts.
Third-party offer
A majority owner receives an acquisition proposal. We assess transfer restrictions and minority participation rights before negotiating sale terms.
Practical approach. A transaction timetable should identify notices, matching rights and required consents. The sale documentation must also address who gives warranties and how proceeds and potential liabilities are allocated among sellers.
Preparing the first discussion
Supply the articles, current ownership and voting schedule, investment terms, management contracts and any shareholder loans. Explain expected future funding and the owners’ different time horizons. For a dispute, add meeting notices, resolutions and correspondence about the contested decision. A useful first discussion identifies both the desired control structure and the situations in which an owner should be able to leave.
Related expertise
Set up a German company · Directors & board duties · Corporate disputes
Discuss your business matter
Tell us which parties and countries are involved, what you want to achieve and whether a deadline is approaching. We will clarify the scope, the appropriate legal team and the fee arrangements before work begins.
Reference: German Limited Liability Companies Act. English translations of German legislation may lag behind the authoritative German text. Application depends on the facts and the relevant current law.