The shareholders' agreement – what should it contain, and when do you need one?

You need one as soon as the company has more than one owner. It governs the relationship between the shareholders: roles and workload, board seats, which decisions need broad agreement, dividend policy, what happens when someone wants to sell or leaves, and how the shares are valued. But it binds only the parties – for a majority requirement to apply as a matter of company law, it has to be in the articles.

The agreement is not the same as the articles

The articles are a matter of company law and bind the company. They are public and registered. The shareholders' agreement is a contract between the shareholders. It binds the parties but not the company as such, and it is not public. That difference is decisive. A shareholders' agreement cannot in itself make a general meeting resolution invalid. Breaching it is a breach of contract between the parties – with the remedies a contract gives. The Companies Act sets its own limits at the same time: section 5-21 prohibits the general meeting from taking decisions apt to give particular shareholders or others an unreasonable advantage at the expense of other shareholders or of the company.

Roles, workload and board seats

Roles and workload. Will both work full time? What happens to the shareholding if one pulls out after six months? That is the most common source of conflict between founders, and the most common thing nobody has written down. Board seats. The parties can agree who gets a seat – for instance: for as long as Investor AS holds at least 20%, the other parties will vote for one director nominated by Investor AS. But do not try to move the board's authority with a contract. The board has duties under the Companies Act that the shareholders cannot contract away.

Major decisions and future financing

Reserved matters. The parties can agree that particular questions – large investments, new owners, selling the business, taking on debt – need, say, 75, 80 or 100% support between them. Future financing. What happens if the company needs a million kroner in a year? Will the owners contribute proportionately, and what is the consequence for someone who cannot or will not? Without a rule this lands in a negotiation at the worst possible moment. See Share issues in a limited company Dividend policy. An agreement that profits will be reinvested, or that a certain share will be distributed, prevents disagreement – but it cannot set aside the requirements for a lawful distribution in Dividends from your own AS

What happens when someone wants to sell?

The Companies Act has starting points on consent and pre-emption when shares change hands, but the parties can agree more. A pre-emption right and a right of first offer are not quite the same: the pre-emption right is triggered by the shares changing owner, while a right of first offer means the shares have to be offered to the others first. Tag-along. Where Anna owns 70% and Bendik 30, and an outside buyer wants Anna's shares, a tag-along can give Bendik the right to require the buyer to take his shares on equivalent terms. Drag-along. The counterpart: a small shareholder should not be able to block a sale where the buyer requires 100%. Lock-up. Transfer restrictions for a period can be agreed, but unreasonable restrictions can be assessed under section 36 of the Contracts Act. New owners should have to accede to the agreement. Otherwise it fades away as the owners change.

Good leaver and bad leaver

What should happen if one of the founders leaves after six months but still owns 40%? Good leaver and bad leaver are not statutory concepts. There is no rule that a bad leaver gets «50% of market value» or only nominal value. The price and the mechanism have to be agreed – and very unbalanced solutions can be assessed under section 36 of the Contracts Act. This is one of the clauses worth spending time on, because it is tested exactly when the relationship between the parties is bad.

How are the shares valued?

An agreement saying «market value» without saying how it is established merely moves the conflict. The agreement should say which method is used, who sets the value where the parties disagree, and which date applies. The methods and what actually drives value are in What is my business worth?. Where one party is to be bought out, see also Buying out a co-owner

Deadlock at 50/50

A company with two owners at 50% each can become deadlocked on a fundamental disagreement. The agreement can have mechanisms for that – escalation, an independent mediator, or buy-sell mechanisms where one party has to buy or sell on terms the other sets. Note that 50/50 does not automatically paralyse the general meeting as a matter of company law: ordinary decisions need a majority of the votes cast, and on a tie what the chair supports normally prevails unless the articles say otherwise. It is amendments to the articles and other qualified decisions that can be blocked.

Death, illness and separation

The agreement should say what happens on death, long-term illness or incapacity – can the heirs become passive co-owners, or do the shares have to be offered to the others? Divorce and separate property are a related risk: a shareholding can become part of a private settlement. See Separating with a shared company and, for transfer to the next generation, Succession in a family business

Non-compete, confidentiality and dispute resolution

Non-compete and non-solicit clauses between shareholders are different from those in employment, which have their own rules in the Working Environment Act. Where the owner is also an employee, both tracks have to be considered. Confidentiality and breach. The agreement should say what counts as a material breach and what follows. Court or arbitration? Arbitration gives confidentiality and is often faster, but costs more. The choice should be deliberate, not a boilerplate clause nobody has read.

What belongs in the articles instead?

This is the most important practical insight. For a company decision to require, say, an 80% majority as a matter of company law, that majority requirement has to be in the articles. A shareholders' agreement only gives a contractual claim against the other parties. Similarly, rules on consent, pre-emption and share classes belong naturally in the articles, while roles, workload, leaver provisions and valuation mechanics belong in the agreement. The two should be read together, and they should not contradict each other.

When should it be made?

At formation, or when the second owner comes in. Anna and Bendik start Kreativ Teknologi AS with 50% each and both intend to work full time. That agreement is easy to write on the day both are enthusiastic, and almost impossible on the day one of them wants out. Greenleaf can help with the valuation basis, the figures behind dividend and financing provisions and the accounting follow-up of ownership changes. The agreement and the articles themselves should be drafted by a lawyer.

This is general guidance, not advice on your specific case. Deadlines, rates and amounts change – always check the current rules, or get in touch with us.

Is it urgent?

We can work out what actually has to be done, what documentation exists and how quickly it can be sorted. You can also reach us in the evenings and at weekends.

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