Shareholders' Agreement in Belgium: Securing Partner Relationships

What Is a Shareholders' Agreement?

A shareholders' agreement is a confidential contract concluded between all or some of the shareholders of a company. It complements the articles of association by organizing their relationships in a more detailed and flexible manner.

Difference from Articles of Association

Why Conclude a Shareholders' Agreement?

Situations That Require It

• Multi-founder creation: whenever 2+ founders associate
• Investor entry: mutual protection between founder and investor
• Family business: succession planning and governance
• Joint venture: framing relationships between partners

Risks Without an Agreement

Without a shareholders' agreement, partners are exposed to:

• Decision-making deadlock (50/50 with no resolution mechanism)
• Departure of a key partner with no buyback option
• Unfair competition from a former partner
• Uncontrolled dilution during new capital increases
• Conflicts over dividend distribution policy

Essential Clauses

1. Share Transfer Clauses

#### Right of First Refusal

Existing shareholders have priority to purchase a departing shareholder's shares, under the same conditions as a third-party offer.

#### Approval Clause

Any share transfer to a third party requires prior approval from other shareholders or a designated body.

#### Tag-Along (Co-Sale Right)

If a majority shareholder sells their shares, minority shareholders can demand to sell theirs under the same conditions. Essential protection for minority investors.

#### Drag-Along (Forced Sale)

If a qualified percentage of shareholders (e.g., 75%) accepts a purchase offer, they can force others to sell under the same conditions.

2. Governance Clauses

• Board composition: seat allocation between shareholders
• Reserved matters: decisions requiring unanimity or qualified majority
• Veto right: on certain strategic decisions
• Reporting: periodic financial information obligations
• Deadlock resolution: mediation or arbitration mechanism

3. Non-Compete Clauses

Prohibition for shareholders from conducting competing activities:

• During the agreement's duration
• After exiting the capital (limited duration: typically 1-3 years)
• Geographic area: must be reasonable
• Business sector: must be precisely defined

4. Valuation Clauses

Pre-defined methods for valuing shares upon transfer:

• Calculation formula based on annual accounts
• Independent expert valuation
• Multiples method (EBITDA, revenue)
• Combination of methods with weighting

5. Exit Clauses

#### Good Leaver / Bad Leaver

• Good leaver (good faith departure): buyback at fair value
• Bad leaver (serious misconduct, competition): buyback at significant discount (30-50%)

#### Put Option / Call Option

• Put option: right to sell shares at a pre-determined price
• Call option: right to buy another shareholder's shares

6. Anti-Dilution Clause

Protection against dilution during future capital increases. The protected shareholder can subscribe on a priority basis to maintain their participation percentage.

Best Practices

Do

• Have the agreement drafted by a specialist corporate lawyer
• Include conflict resolution mechanisms (mediation, then arbitration)
• Define clear and objective valuation formulas
• Include periodic review clauses (every 3-5 years)
• Adapt the agreement to the company's evolution

Avoid

• Overly broad non-compete clauses (risk of nullity)
• Agreement contradicting the articles (articles take precedence)
• Absence of an end date or exit mechanism
• Fixed valuation without revision mechanism
• Leonine clauses (excessively favoring one partner)

Belgian-Specific Legal Aspects

Validity and Enforceability

• The agreement is a common law contract subject to Articles 5.1 et seq. of the new Civil Code
• It is not enforceable against the company or non-signatory third parties
• In case of conflict between articles and agreement, articles prevail
• The agreement may be for a fixed or indefinite term

Sanctions for Breach

• Damages: compensation for loss suffered
• Forced execution: possible in certain cases (penalty payments)
• Nullity of the transaction: if the third party acted in bad faith
• Penalty clause: contractually predetermined lump sum

Conclusion

Starting a company with partners? LegalBelgique drafts your tailor-made shareholders' agreement, adapted to your structure, objectives, and the specificities of Belgian law. Preventing conflicts costs far less than resolving them.