FREQUENTLY ASKED QUESTIONS/What if a shareholder does not comply with the shareholders' agreement?/

The shareholders

What if a shareholder does not comply with the provisions of the shareholders' agreement? 

The shareholders' agreement is a contract, therefore, the violation of the clauses of the agreement by a shareholder is first governed by the ordinary law of contracts.

In the event of a breach of the agreement by a shareholder, the latter is contractually liable and may be required to pay damages. To incur the contractual liability of the offending shareholder, it will be necessary to prove the existence of a damage directly caused by the breach of the agreement.

In addition, the forced execution of contractual obligations can be considered in some exceptional cases. This is possible in particular when the breached obligation is a duty to act (for example, in the context of the breach of a non-competition provision). The enforcement of an obligation under the shareholders' agreement can sometimes be more in line with the interests of creditors than a simple payment of damages. This is particularly the case when the commitments involves transfers of shares (pre-emption clauses, tag-along or drag-along provisions, etc.)

However, the shareholders may provide for conventional arrangements within the framework of the shareholders' agreement in order to set other sanctions than the payment of damages and the forced execution of some obligations. Here are some provisions to do so:

  • Penalty clauses: these clauses can be considered "punitive" because they make it possible to set an amount of compensation to be paid by the shareholder who has violated a provision of the agreement in proportion to the consequences of the violation of the obligation. The amount provided for may be amended by the judge.
  • Exit clauses: these clauses retroactively lead to the termination of the shareholders' agreement in the event of non-compliance with the obligations mentioned in it. This is particularly the case for deadlock clauses and resolutory clauses.

 

alf provides you with a shareholders' agreement with the necessary clauses to secure and ensure the viability of your company, as soon as your company is incorporated.

Read more: 

An introduction to shareholders' agreement

The content of your shareholders' agreement

The number of shareholders in your company

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