Shareholders' agreement in Luxembourg: the essential clauses to provide for

Why a shareholders' agreement is essential

The shareholders' agreement in Luxembourg is a contract concluded between the shareholders, separate from the articles of association, which organises their relations and anticipates situations of disagreement. Where the articles set the general and public framework of the company, the agreement governs the relations between shareholders confidentially: admissions, exits, governance and the resolution of deadlocks.

Its value lies in providing, in calm times, for what will happen in the event of tension: the departure of a shareholder, a strategic disagreement, the arrival of an investor or a death. A company without an agreement exposes its shareholders to costly deadlocks, sometimes insoluble without court proceedings.

The essential clauses to provide for

Several clauses structure a good agreement. Approval and pre-emption clauses control the entry of new shareholders. Tag along and drag along clauses organise the transfer in the event of a majority sale. Governance clauses allocate powers and set the decisions subject to a reinforced majority.

To these are added deadlock resolution clauses, sometimes called divorce clauses, which provide a mechanism for exit when the shareholders no longer agree. Non compete and confidentiality clauses, finally, protect the company and its activity.

Each clause must be calibrated according to the project, the number of shareholders and the balance of capital. A standard agreement copied from a template often creates more problems than it solves.

Aligning the agreement and the articles

The agreement and the articles must be consistent: a clause of the agreement that contradicts the articles can be a source of litigation. Because the agreement is confidential, it makes it possible to provide for commitments that the shareholders do not wish to make public, while complying with the Luxembourg legal framework.

The corporate lawyers at Cerno Law Firm draft and negotiate these agreements according to your situation, ensuring their alignment with the articles and their legal effectiveness. An initial consultation is available from 175 euros excluding VAT to scope your need.