In this ten-part blog series, we reflect on the life cycle of a business. Which legal form should I choose? What is required to establish a company? How does a company come to an end? Who are the stakeholders involved, and how do you deal with a business partner who leaves? In this fifth part, we discuss how arrangements within a company can be structured. We also address the importance of clear agreements.
When a company has multiple directors and/or shareholders, it is advisable to make arrangements in advance and record them in writing. By setting out agreements in a shareholders’ agreement or a management regulation, expectations are identified and mutually expressed beforehand. This creates clarity between directors or shareholders.
A shareholders’ agreement is a contract concluded between two or more shareholders in addition to the articles of association. Shareholders often choose to include additional arrangements in a separate agreement because, unlike the articles of association, a shareholders’ agreement does not have to be made public.
Shareholders’ agreements often include arrangements regarding voting behaviour. They also set out how and to what extent shareholders will be provided with information. An important part of the shareholders’ agreement concerns exit arrangements (leaver provisions), in which it is agreed under which circumstances a shareholder must offer their shares to the other shareholders.
A management regulation is an internal document in which agreements between directors are laid down. It supplements the law and the articles of association in a practical way, covering arrangements such as the division of tasks, decision-making, information sharing, and handling conflicts of interest. A management regulation is usually not legally required, but it is strongly recommended if the company is managed by multiple directors or if a supervisory board has been appointed.
The difference between a management regulation and the articles of association is that the articles contain the basic rules and are drawn up by a civil-law notary. A management regulation, on the other hand, is more flexible and can be amended more easily. A management regulation may not conflict with the law or the articles of association; any conflicting provisions are invalid. In practice, a well-drafted regulation ensures clarity, faster decision-making, and fewer disputes about directors’ powers.
Do you have questions about cooperation arrangements or would you like to have a shareholders’ agreement or management regulation drafted for your company? Please feel free to contact Manon Hoekstra or Jarno de Graaf, Corporate Law attorneys.
This blog is part of the blog series ‘The life cycle of a business’.
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