What is a shareholder agreement?

A contract under which shareholders, or shareholders together with a third person, agree to exercise in a defined manner the rights arising from shares or other rights and to perform the respective obligations.

Must a shareholder vote on the instruction of an organ?

No. A contract or charter provision obliging a shareholder to exercise the voting right upon the instruction of the governing organ or the supervisory council is void.

What happens on breach of the agreement?

Performance is binding only on the parties: a breach does not release the company from its duty to let the shareholder exercise his or her rights and cannot annul organ decisions.

Do these rules extend to partners of an LLC?

Yes. The corresponding norms on shareholder agreements apply to the partner agreements of a limited liability company.

Shareholder Agreements in Tbilisi, Georgia

A Shareholder Agreement (SHA), or Partners' Agreement in the case of an LLC, is one of the most critical legal instruments in corporate governance, complementing the company's charter and regulating relationships between partners. Unlike the charter, which is a public document accessible to any interested person via the Public Registry, a Shareholder Agreement is confidential. It allows business partners to detail the rules of the game, decision-making mechanisms, profit distribution principles, and conflict resolution paths without making this information public. The new "Law on Entrepreneurs" of Georgia places special emphasis on the partners' agreement, giving it priority in internal relations. A professionally drafted agreement guarantees business stability, protecting the interests of both majority and minority shareholders and avoiding destructive corporate disputes.

What Does Shareholder Agreement Service Cover?

Corporate lawyers on the Legal.ge platform offer comprehensive preparation of Shareholder Agreements tailored to your business specifics. The service includes:

Governance and Voting Rules: Allocation of rights to appoint directors, veto rights on strategic decisions, and special quorum requirements.
Share Transfer Restrictions: Right of First Refusal, protecting partners from unwanted third parties entering the company.
Tag-along and Drag-along Rights: Mechanisms protecting minorities when shares are sold (Tag-along) and allowing majorities to sell the entire company by forcing minorities to join (Drag-along).
Dividend Policy: Defining mandatory minimums for profit distribution and reinvestment conditions.
Deadlock Resolution: Mechanisms for resolving situations where partners cannot agree (e.g., "Russian Roulette" or "Texas Shootout" methods).
Funding Obligations: Partners' obligation to contribute additional capital if needed and sanctions for breaching this obligation.

Real-World Scenarios When You Need This Service

Executing a Shareholder Agreement is essential in many practical scenarios:

50/50 Partnership: When two partners have equal shares, the risk of a "deadlock" is high. The agreement predefines who decides or how the business is sold during a conflict.
Financial Investor Entry: A passive investor wants guarantees that management will not make decisions harmful to them and that they will have access to information.
Startup Founding: Founders need to outline Vesting conditions so that if one leaves the company early, they do not retain their full share.
Minority Protection: It is critical for minority shareholders that the majority cannot unjustifiably increase capital to dilute their shares.

Shareholder Agreements