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In my previous contributions “A shareholder agreement to make your startup investor-proof” and “The shareholder agreement: some practical tips” I already wrote about the usefulness and necessity of the shareholder agreement. In order to avoid conflicts with, for example, future investors, it is wise to make good agreements about the cooperation. Not only agreements about the positive aspects of the cooperation, but above all agreements about what should happen if the cooperation does not go as expected.

The inclusion of such agreements in a shareholder agreement is important. But what if one of the parties refuses to comply with the agreements in the shareholder agreement? This scenario must also be taken into account when drawing up a shareholder agreement.

Penalty clause in the shareholder agreement

A self-evident way of enforcing compliance with agreements from the shareholders’ agreement is the inclusion of a penalty clause. A penalty clause is a clause stipulating that the party who fails to fulfil his or her obligation is obliged to pay a sum of money (or another performance). A penalty clause can serve as compensation for any damage or only as an incentive to perform. If a shareholder, who is a party to the shareholders’ agreement, violates an agreement in the shareholders’ agreement, it is possible for the other shareholder(s) to enforce a fine. Very high fines are often agreed upon, which in principle also have to be paid. However, at the request of the shareholder who has to pay the fine, the court can, if fairness so requires, mitigate the stipulated fine. This follows from Article 6:94 of the Dutch Civil Code. However, this power of moderation is applied with restraint. It is not possible to contractually exclude the reliance on moderation.

Agreements from shareholders’ agreement also valid after transfer of shares?

Shares can be transferred to other parties in different ways. This can be via general title or via special title.

Transfer of shares under general title

One obtains goods under ‘general title’ among other things by partition, merger or division of the estate. If shares are transferred by universal title, the obligations arising from the shareholders’ agreement follow the shares in question. In this way, the penalty clause, with a few exceptions, will also apply to new shareholders.

Transition of shares under special title

Shares may also be transferred by ‘special title’. A transfer by special title includes the sale or purchase of shares. In the case of the sale of shares by special title, the obligations arising from the shareholders’ agreement may not, as in the case of general title, be enforced against the new shareholder. This therefore also means that the penalty clause cannot be invoked against the new shareholder. This is an unfavourable situation for the incumbent shareholders.

Chain clause in the shareholders’ agreement

The situation that a new shareholder cannot be held to the agreements in the shareholder agreement can be prevented by including a chain clause. By including a chain clause in the shareholders’ agreement, it is hoped that the current shareholder will also impose the obligations from the shareholders’ agreement on the shareholder who has purchased the shares (and then the new shareholder will also impose them on his legal successor, if any). The shareholders are thus obliged to ‘pass on’ the shareholders’ agreement and the obligations arising from it. Incidentally, when including a chain clause, it is advisable to agree on a penalty in the event that the shareholder who sells his shares does not comply with the chain clause.

Enforcing compliance with shareholder agreement obligations

This article provides various practical recommendations for enforcing the obligations arising from a shareholder agreement. However, many issues have not yet been discussed, such as the effect of the shareholder agreement and the non-competition clause. It is advisable to seek expert advice when assessing a shareholder agreement. Do you have questions about the shareholders’ agreement or other company law issues? If so, please contact Justin de Vries.