Shareholders’ agreement: which clauses does a Dutch company need?

The clauses that make a Dutch shareholders’ agreement worth having are the ones that decide what happens when the relationship between the shareholders breaks down. Everything else can usually be negotiated at the time; these cannot.

Five belong in almost every agreement. Transfer restrictions and pre-emption rights, which determine whether a shareholder can sell and to whom, and how the price is set when they do. Drag-along and tag-along, which allow a majority to deliver the whole company to a buyer and protect a minority from being left behind with a new controlling shareholder. Leaver provisions, distinguishing between a shareholder who departs in ordinary circumstances and one who leaves in breach, and attaching a different valuation to each. A deadlock mechanism, because two equal shareholders who disagree can otherwise paralyse the company entirely. And reserved matters, giving a minority a veto on defined decisions that the statutory majority rules would otherwise leave entirely to the majority.

What is a shareholders’ agreement?

A shareholders’ agreement (aandeelhoudersovereenkomst) is a contract between the shareholders of a company, and often the company itself, about how they will work together. It sits next to the articles of association (statuten) and fills in what the law and the articles leave open.

Dutch law does not require a shareholders’ agreement. A private limited company (besloten vennootschap, BV) can function on the basis of its articles and the statutory rules in Book 2 of the Dutch Civil Code (Burgerlijk Wetboek, BW). The agreement becomes valuable as soon as there is more than one shareholder and their interests may one day diverge: founders who start together, a family business with several branches, or a company that brings in an investor.

The main reason to sign one is privacy and flexibility. The articles are laid down in a notarial deed and filed with the Dutch Chamber of Commerce (KVK), where anyone can consult them. A shareholders’ agreement is a private contract. You can change it without a notary, and you can agree on commercial details, such as valuation formulas or the personal commitments of founders, that you would rather not make public.

How does the agreement relate to the articles of association?

The articles bind every shareholder and the company automatically; the agreement only binds the parties who signed it. That difference determines where each provision belongs.

A new shareholder becomes bound by the articles the moment they acquire shares. They do not become bound by the agreement unless they accede to it. A well-drafted agreement therefore obliges each shareholder to make any buyer of their shares sign a deed of accession. Since the flexibilisation of BV law in 2012, the articles of a BV can also attach obligations to shareholdership (article 2:192 BW). That makes it possible to anchor key obligations, such as the duty to accede to the agreement or to offer shares in defined situations, in the articles themselves, so that they also bind future shareholders.

The second difference concerns resolutions. If the shareholders adopt a resolution that conflicts with the agreement but complies with the law and the articles, that resolution is generally valid under company law. The shareholder who was wronged then has a claim against the other parties for breach of contract, but cannot simply have the resolution set aside. Provisions that must bind the company itself, such as a qualified majority for certain decisions, therefore belong in the articles as well. Where the two documents conflict, most agreements state that the agreement prevails between the parties and oblige the shareholders to amend the articles accordingly.

Which clauses belong in a Dutch shareholders’ agreement?

How do you restrict share transfers?

Under Dutch law, the shares in a BV are subject to an offer obligation unless the articles provide otherwise. Article 2:195 BW provides that, unless the articles provide otherwise, a shareholder who wants to sell must first offer the shares to the other shareholders, in proportion to their holdings. The articles can replace this with a different arrangement, such as approval by the general meeting. Since the 2012 reform of BV law, the articles may also exclude transfer altogether for a fixed period.

The shareholders’ agreement then fills in the details. Typical points are:

• Pre-emption right on sale. Who has the first right to buy, in what order, and within which period. The agreement should fix the price mechanism: an agreed formula, a valuation by an independent expert, or the price offered by a bona fide third-party buyer.
• Permitted transfers. Transfers that do not trigger the offer obligation, for example to a shareholder’s own holding company. The agreement should then provide that the shares go back if the holding company leaves the shareholder’s control.
• Lock-up. A period, often linked to the start-up phase or an investment round, during which founders may not sell at all.

Two exit clauses deal with the sale of the company as a whole. A drag-along right allows a defined majority to oblige the other shareholders to sell on the same terms to a third party who wants to acquire 100% of the shares. A tag-along right works the other way: if a majority shareholder sells to a third party, the minority may join in and sell its shares on the same terms. Neither right exists by law; both are purely contractual and need to be drafted precisely. Set out the threshold that triggers the right, what “the same terms” means when a buyer pays partly in shares or with an earn-out, and which warranties a dragged shareholder must give.

Keep in mind that a share transfer in a BV always requires a notarial deed (article 2:196 BW). The notary will check whether the transfer restrictions in the articles have been complied with, but not whether the shareholders’ agreement has been observed. That is another reason to include the most important transfer provisions in the articles as well.

Pre-emption on the issue of new shares follows a separate rule. Unless the articles provide otherwise, every shareholder has a pre-emptive right on new shares in proportion to their holding (article 2:206a paragraph 1 BW). The general meeting can limit or exclude this right for each individual issue. An investor will usually want contractual protection against dilution on top of this statutory right.

How do you arrange decision-making and deadlock?

By law, the general meeting decides by an absolute majority of the votes cast, unless the articles require a larger majority. A shareholders’ agreement can change the balance by giving one or more shareholders a veto on specific decisions, known as reserved matters.

Typical reserved matters are amendments to the articles, the issue of new shares, the appointment and dismissal of directors, the adoption of the budget, large investments or loans, the sale of important assets, and transactions between the company and a shareholder. The list should be concrete. A general clause such as “all important decisions” invites disputes about what counts as important.

The agreement often also arranges the composition of the management board (bestuur) and, where there is one, the supervisory board (raad van commissarissen). Each shareholder group may, for example, nominate one director, with the other shareholders undertaking to vote for that candidate. In a BV, the articles may even give holders of a specific class of shares the right to appoint a director directly.

A deadlock arises when shareholders with equal power, or a minority with a veto, cannot agree. Without a solution in the agreement, the company can be paralysed. Common deadlock mechanisms are:

• Escalation. The issue first goes to a meeting of the shareholders themselves, and then to an independent mediator.
• Casting vote. An independent chair or supervisory director decides. This only works if the parties trust that person.
• Russian roulette or shoot-out. One shareholder names a price per share; the other must either sell at that price or buy at that price. This ends the deadlock quickly but favours the party with the most financial resources.
• Texas shoot-out. Both shareholders submit a sealed bid; the highest bidder buys the other out.
• Sale of the company or dissolution as a last resort.

A buy-sell mechanism is effective but final. Agree in advance what counts as a deadlock, for example a decision that has been blocked at two consecutive meetings, and how long the parties have to reach a solution before the mechanism is triggered.

How do you arrange dividends and financing?

The general meeting decides on distributions, but only to the extent that equity exceeds the reserves required by law or the articles (article 2:216 paragraph 1 BW). A resolution to distribute has no effect until the management board has approved it. The board must refuse approval if it knows, or should reasonably foresee, that the company will not be able to keep paying its debts as they fall due after the distribution (article 2:216 paragraph 2 BW).

This statutory test cannot be set aside by agreement. Directors who approve a distribution that leaves the company unable to pay its debts are jointly and severally liable to the company for the shortfall (article 2:216 paragraph 3 BW). A shareholders’ agreement can therefore lay down a dividend policy, for example the distribution of a fixed percentage of profit, but always subject to the board’s statutory test.

Be careful with any arrangement that gives some shareholders a larger share of profit than their shareholding. Under BV law, this is possible through different classes of shares, but it must be laid down in the articles to be effective towards the company.

What should you check as a minority shareholder?

Without an agreement, the majority appoints the board and decides on distributions by an absolute majority of the votes cast. Check these points before you sign:

• Which decisions are reserved matters that need your consent; a vague clause such as “all important decisions” invites disputes.
• Whether you may nominate a director or supervisory director, and whether the other shareholders must vote for your candidate.
• The threshold for your tag-along right, and what “the same terms” means if the buyer pays partly in shares or with an earn-out.
• Your information rights, such as monthly figures, the budget and the annual accounts.
• Anti-dilution protection on top of your statutory pre-emptive right under Article 2:206a BW.
• The price mechanism and the valuation deadline if you ever have to offer your shares.

What should you check as a majority shareholder or investor?

For the majority, the agreement must above all keep the company able to act and to be sold. Check these points:

• Whether the drag-along threshold lets you deliver 100% of the shares to a buyer.
• Whether the key transfer restrictions and the accession obligation are also anchored in the articles (Article 2:192 BW).
• How good leaver and bad leaver events are defined, and how they fit the founders’ employment or management agreements.
• Whether founders are bound by non-compete, non-solicitation and full-time commitment clauses.
• Whether the penalty clause is proportionate, since a court may reduce it under Article 6:94 BW.

How does the agreement handle a shareholder who leaves?

Leaver provisions decide what happens to the shares of a shareholder who stops working in the business. They usually oblige that shareholder to offer their shares to the other shareholders or to the company, at a price that depends on the reason for leaving.

The common distinction is between a good leaver and a bad leaver. A good leaver, for example someone who leaves because of long-term illness, retirement or dismissal without fault, receives the market value. A bad leaver, for example someone who resigns within a short period or is dismissed for a serious breach, receives a lower price, often the nominal value or the lower of nominal and market value.

Define the leaver events precisely and link them to objective facts. Disputes about whether someone is a good or bad leaver are among the most common shareholder disputes. Consider also how the leaver provisions relate to the employment or management agreement of the departing shareholder: an arrangement that has the effect of a penalty in an employment context may be tested by the courts against employment law protection.

An example to illustrate: two founders each hold 50% of a BV. One of them leaves after eighteen months to join a competitor. If the agreement defines this as a bad leaver event and sets the price at nominal value, the remaining founder can acquire the shares at a low price and continue the business. Without such a clause, the departing founder keeps half the company and can block every decision that requires a majority.

How do you draft and enforce the agreement?

A shareholders’ agreement only protects you if it can be enforced. That depends on precise drafting, alignment with the articles and effective sanctions.

What should you settle when drafting?

Start with the articles. Check which statutory rules they already set aside and which provisions of the agreement must also be reflected in them. Then work through the following points:

• Parties. Include the company as a party, so that it is bound by the provisions that concern it, for example the obligation not to register a transfer in breach of the agreement in the shareholders’ register.
• Accession. Oblige every new shareholder to accede to the agreement, and anchor that obligation in the articles where possible.
• Price mechanism. Choose a valuation method that is workable without a lengthy expert procedure, and set a deadline for the valuation.
• Duration and termination. An agreement for an indefinite period can, under Dutch law, in principle be terminated. Many agreements therefore provide that they remain in force as long as the parties hold shares, and exclude termination.
• Penalty clause. A penalty (boete) for breach of key obligations gives the agreement teeth. Under articles 6:91 and 6:94 BW, a court may reduce a penalty if fairness clearly requires this, so set an amount that is proportionate to the interest it protects.
• Governing law and forum. For a Dutch company with foreign shareholders, choose Dutch law and decide whether disputes go to the Dutch courts or to arbitration, for example under the rules of the Netherlands Arbitration Institute (NAI).

How is the agreement enforced?

A breach of the agreement is a breach of contract. The injured shareholder can claim performance, damages or forfeiture of the agreed penalty. In urgent cases, for example to prevent a share transfer or a vote in breach of the agreement, you can ask the preliminary relief judge (voorzieningenrechter) for an injunction in summary proceedings (kort geding).

Voting agreements can also be enforced: a court can order a shareholder to vote in a certain way, if necessary on pain of a penalty payment (dwangsom). Speed matters here. Once a resolution has been adopted, it is generally valid under company law, even if it was taken in breach of the agreement. A resolution can only be annulled on the grounds listed in the law, for example if it conflicts with the requirements of reasonableness and fairness under article 2:8 BW. Whether a breach of the agreement is enough for that depends on the circumstances of the case.

What can you do if the agreement does not solve the dispute?

If the agreement offers no way out, Dutch law has its own procedures for serious shareholder conflicts. The statutory dispute resolution procedure (geschillenregeling, articles 2:335 and following BW) allows a court to order a shareholder whose conduct harms the company to transfer their shares (expulsion), or to order the other shareholders to take over the shares of a shareholder whose rights or interests have been harmed by their conduct to such an extent that continued shareholdership cannot reasonably be required (exit).

In addition, the Enterprise Chamber of the Amsterdam Court of Appeal (Ondernemingskamer) can conduct an inquiry into the policy and conduct of business of a company if there are well-founded reasons to doubt sound policy (enquêterecht). During those proceedings, it can take immediate measures, such as suspending directors or appointing a temporary director.

What can we do for you with a shareholders’ agreement?

Our corporate lawyers draft, review and enforce shareholders’ agreements for Dutch companies and their shareholders.

• We review your draft agreement and the articles of association side by side and flag the provisions that must also go into the articles.
• We draft transfer, drag-along, tag-along, leaver and deadlock clauses that fit the balance of power between you.
• We coordinate with the civil-law notary on the deed of transfer (Article 2:196 BW) and any amendment of the articles.
• We advise on a proportionate penalty clause and on the choice between the Dutch courts and NAI arbitration.
• We apply to the preliminary relief judge in summary proceedings to stop a share transfer or vote in breach of the agreement.
• We assess whether the statutory dispute resolution procedure or an inquiry by the Enterprise Chamber is a realistic route.

Summary

• A shareholders’ agreement is a private contract that supplements the articles of association; it binds only the parties who signed it or acceded to it.
• The key clauses are transfer restrictions and pre-emption rights, drag-along and tag-along, leaver provisions, a deadlock mechanism and reserved matters.
• Provisions that must bind the company or future shareholders belong in the articles as well; an accession obligation is essential.
• Statutory rules, such as the distribution test of Article 2:216 BW and the notarial deed for share transfers, cannot be set aside by agreement.
• Enforcement depends on precise drafting, a proportionate penalty clause and quick action, if needed in summary proceedings.

Frequently asked questions