In the startup ecosystem, rapid growth and the progressive entry of investors make it essential to have a solid legal basis from the very early stages. In this context, the shareholders' agreement it is configured as one of the key tools to guarantee project stability and avoid conflicts that could block its development.
Despite their relevance, many startups postpone their negotiation or use uncustomised standard models, causing problems when the company begins to scale or enters an investment round.
In this Startup News we analyse what is a shareholders' agreement, why it is essential and what the critical clauses are that must not be left out.
What is a shareholders' agreement and what is its function?
The shareholders' agreement is a private shareholders' agreement which regulates essential aspects of their relationship, beyond what is provided for in the company articles of association.
Its main function is anticipate and order future situations, aligning the interests of founders, investors and the other relevant stakeholders.
Unlike the articles of association, the shareholders' agreement allows for greater flexibility and detail, making it a essential tool in startups, where business evolution is rapid and fast-changing.
Why is it critical in startups?
In the early stages, founders often share vision and trust. However, when scaling, new variables emerge:
- Entry of investors with different economic interests.
- Need to professionalise the management.
- Exit scenarios (exit, partial sale, extensions).
- Disputes between partners over commitment, strategy or results.
A well-designed shareholders' agreement enables avoiding corporate deadlocks, protecting strategic control and facilitating future investment rounds.
Key clauses in a startup shareholders' agreement
1. Governance and decision-making
It is essential to define how strategic decisions are made:
- Supermajorities.
- Reserved matters.
- Composition of the board of directors.
This prevents deadlocks and provides predictability for investors.
2. Rules governing the transfer of shares
Drag-along and tag-along clauses are essential:
- Drag-along (drag): allows forcing a joint sale in an exit.
- Tag-along (accompaniment): protects minority shareholders.
These clauses are particularly relevant in M&A transactions.
3. Vesting and commitment of the founders
One of the most critical points in startups.
Vesting ensures that founders earn their stake progressively, based on their tenure and contribution to the project.
It usually includes:
- Period of vesting.
- Cliff Initial.
- Assumptions of Good y bad leaver.
4. Economic rights and investor protection
They can include:
- Enhanced information rights.
- Liquidation preference.
- Anti-dilution clauses.
These tools seek to balance risk and return for investors.
5. Conflict resolution and exits
It is key to anticipate deadlock or conflict scenarios:
- Clauses of deadlock.
- Compulsory purchase mechanisms (buy-sell).
- Options for an orderly exit.
Poor management of these situations can bring the start-up to a complete standstill.
Common mistake: failing to sign an agreement or copying standard templates
One of the most common mistakes is failing to sign a shareholders’ agreement at an early stage, or using generic templates without adapting them to the specific circumstances. If an agreement is not signed at the outset, it is much more difficult to sign one at a later stage of a project. Negotiations can become deadlocked and, in many cases, grind to a halt without reaching a successful conclusion.
This usually results in:
- Ambiguity regarding rights and obligations.
- Conflicts between founders.
- Challenges in funding rounds.
- Loss of control or unanticipated dilution.
An agreement that has been carefully drawn up from the outset saves on costs and avoids conflicts in the medium term.
Conclusion: the partnership agreement as a pillar of growth
The partnership agreement is not merely a formal document, but a strategic governance tool which allows for anticipating scenarios, protecting partners and facilitating the growth of the startup.
A clear, balanced document that reflects the reality of the project instils confidence in investors and prevents internal tensions at crucial moments. In Busquets Law & Finance We specialise in designing shareholders' agreements tailored to each stage of any startup, aligning interests and guaranteeing legal certainty.
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