Importance of Shareholder Agreements and SMEs

The business landscape, largely dominated by small and medium-sized enterprises (SMEs), personal trust between shareholders is, on many occasions, the main foundation of a commercial company.

Friends, family members, or former colleagues decide to embark together on a business venture, guided by shared enthusiasm and commitment. However, over time, business dynamics evolve, and with them tensions, divergent interests, or management disagreements may arise. It is at that point where shareholder agreements prove to be an indispensable tool, not only to prevent conflicts, but to ensure the stability and long-term success of the company.

This article is aimed at business owners, entrepreneurs, shareholders, and investors who wish to fully understand what a shareholder agreement is, what its function is, why it is so relevant (especially in SMEs), and what essential aspects it should include to fulfill its purpose.

What is a shareholder agreement?

A shareholder agreement is a private agreement between the shareholders of a company that regulates aspects of the corporate relationship that, although legal and valid, are not usually included in the articles of association. It is not expressly regulated in the Capital Companies Act, but its legality is fully recognized by case law and commercial practice.

Its objective is to complement the articles of association and anticipate situations of potential conflict, establish control mechanisms, define specific rights and obligations of shareholders and, above all, protect the stability of the business project.

In other words, while the articles of association are the “public legal framework” registered in the Commercial Registry, the shareholder agreement is the “private agreement” that shapes the particular interests of the shareholders.

Why is it especially important in SMEs?

SMEs are usually characterized by:

• A small number of shareholders.
• Personal or family ties between them.
• High participation of shareholders in direct management.
• Limited professionalization of internal governance.

These characteristics mean that, in the event of a conflict, the company can be seriously affected, since there is usually not a sufficiently robust structure to absorb serious tensions or disagreements.

Furthermore, in many SMEs there is no clear vision of the future: neither about what to do if a shareholder wants to sell their stake, nor about how key decisions will be made if the shareholders disagree. In this context, the shareholder agreement is an essential tool for foresight and control.

Essential aspects that a shareholder agreement should include

Below are the clauses and matters that, from experience, we consider essential in a shareholder agreement, especially in SMEs:

1. Transfer of shares: One of the most common sources of conflict. The agreement must regulate:

• Valuation procedures in case of exit.
• Right of first refusal and redemption.
• Temporary restrictions on transferability (lock-up).
• Requirements for incorporating new shareholders.

2. Drag-along and tag-along rights: To protect minority shareholders (tag-along right) and allow orderly sales to third parties (drag-along right).

3. Distribution of dividends and reinvestment policy: Especially important when there are shareholders with different profiles: some may want immediate profits and others, to reinvest for growth.

4. Distribution of functions and remuneration: Avoids conflicts about what each shareholder does, what their dedication to the business is, whether they are entitled to fixed or variable remuneration, etc.

5. Decision-making regime and qualified majorities: Defines which decisions require qualified majorities, and whether some shareholders have veto rights on key decisions (e.g., borrowing, sale of assets, hiring of family members, etc.).

6. Non-competition and exclusive dedication: Especially important when shareholders have other businesses or activities. The obligation not to compete and exclusivity in dedication can be regulated.

7. Entry and exit of shareholders: Must anticipate how a new shareholder can enter or how an orderly exit should occur (justified causes, valuation, financing of the exit, etc.).

8. Confidentiality and intellectual property: To protect the know-how and intangible assets generated within the company.

9. Conflict resolution: It is advisable to establish mechanisms prior to legal proceedings: mediation, arbitration, or even the intervention of an independent third party to unblock decisions.

Common mistakes to avoid

Signing without legal advice: Many shareholder agreements are signed without the intervention of a specialized lawyer, which generates unbalanced or unenforceable documents.

Relying on standard templates: Each company and relationship between shareholders is different. A template downloaded from the internet rarely adapts to the reality of a specific SME.

Not updating the agreement: Circumstances change, and an agreement that worked 5 years ago may become obsolete. It is advisable to review it periodically.

Not integrating it with the articles of association: Although the agreement is private, it must be aligned with the articles of association to avoid contradictions that generate legal uncertainty.

Specific advantages for the company

• Prevention of litigation and conflicts between shareholders.
• Greater clarity in decision-making.
• Protection of the project against external interference.
• Confidence of investors, financial institutions, and new shareholders.
• Professionalization of governance.

A good shareholder agreement is not an obstacle, but a guarantee of stability, transparency, and business success. In an SME, where human and financial resources are limited, each internal conflict can jeopardize the entire business. Therefore, anticipation is key.

To bear in mind

The shareholder agreement is a fundamental tool to safeguard the future of a company, especially in the context of SMEs, where personal and financial balances are fragile. It is an investment in security, mutual trust, and professionalization.

At IN DIEM Abogados, we help design, negotiate, and review shareholder agreements tailored to each business reality. We do so with legal vision, but also with strategic judgment, understanding the business, internal balances, and future challenges.

If you have a company, or are considering creating one with other shareholders, do not leave this aspect to chance or good faith. Contact our team and let us put the rules of the game in writing, clearly and securely.

How can we help you?

Abogados IN DIEM has extensive experience and a high degree of specialization in the area of Corporate Law and Shareholder Agreements, offering comprehensive advice in processes of participation and investment in commercial companies.

Among the services we offer are:

• Analysis and strategic planning: We study the most appropriate options to choose the jurisdiction that best suits the tax, operational, and legal needs of your business.
• Comprehensive management of the acquisition process: We draft and formalize articles of association, shareholder agreements, family protocols, etc.
• Intervention in conflicts and defense of shareholders: We advise in conflict processes, as well as in the protection and defense of shareholders’ rights.
• Tax and legal optimization: We design structures that minimize legal and tax risks, taking advantage of the benefits of international treaties and local regulations.

Contact IN DIEM Abogados 24 hours a day, any day of the week, without obligation. We guarantee the best possible outcome, whatever your case may be.

• Personalized and professional service
• Assistance throughout the judicial or notarial process
• 24-hour contact with your expert corporate law lawyer
• Absolute confidentiality

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IN DIEM Attorneys has extensive experience and a high degree of specialization in the area of Corporate Law, offering comprehensive advice on participation and investment processes in commercial companies.

Among the services we offer are:

• Analysis and strategic planning: We study the most appropriate options to choose the jurisdiction that best suits the tax, operational, and legal needs of your business.
• Comprehensive management of the acquisition process: We draft and formalize articles of association, shareholders’ agreements, family protocols, etc.
• Intervention in conflicts and defense of shareholders: We advise in conflict processes, as well as in the protection and defense of shareholders’ rights.
• Tax and legal optimization: We design structures that minimize legal and tax risks, taking advantage of the benefits of international treaties and local regulations.

IN DIEM Abogados has a team with experience in previous roles such as Judge, State Attorney, Public Prosecutor, or University Lecturer, which will provide you with peace of mind and confidence, as you will have the best team—competitive and highly prepared—to achieve your objectives and meet your needs.

We are at your disposal for anything you need. You can reach us via IN DIEM Lawyers Phone (+34) 916 353 892. For urgent cases, you can contact us on IN DIEM 24-Hour Emergency Lawyers Phone: (+34) 610 667 452.

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We offer our clients the option of being assisted via video call or videoconference, as well as by telephone, according to our clients’ preference, so that the assistance is as personal as possible, with absolute immediacy, without the need to travel. This service is complemented by communication via email, which facilitates the analysis and delivery of documentation.

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