Shareholders Agreements: The Key to Preventing Conflicts in a Merger

What are partnership agreements?

Partnership agreements are private agreements signed by the partners of a company, which establish the rules and conditions for the management of the company, decision-making, and dispute resolution. In the context of a merger, these agreements become especially relevant, as they allow the partners of the merging companies to establish a framework for collaboration and mutual understanding for the future.

Why are partnership agreements important in a merger?

Conflict prevention: Partnership agreements establish a clear framework for decision-making and dispute resolution, thus avoiding future disagreements among partners.

Protection of partners’ expectations: Each partner has their own expectations and objectives when participating in a merger. Partnership agreements allow these expectations to be protected and ensure that each partner’s interests are taken into account.

Tools for managing the merged company: Partnership agreements can establish clear and efficient governance mechanisms, thereby facilitating the management of the merged company.

Increased trust among partners: By establishing a framework for collaboration and mutual understanding, partnership agreements contribute to increasing trust among partners and strengthening interpersonal relationships.

Essential clauses in a partnership agreement for a merger

Decision-making: The governing bodies of the new company and the procedures for making important decisions, such as the approval of investments or the distribution of dividends, must be defined.

Distribution of profits and losses: A clear formula must be established for the distribution of profits and losses among the partners, taking into account the contributions of each and the value of their shares.

Entry and exit of partners: The conditions for the entry of new partners and the exit of existing partners must be established, including the valuation of the shares and liquidation mechanisms.

Dispute resolution: Effective mechanisms for resolving disputes must be established, such as mediation or arbitration.

Confidentiality clauses: It is important to include confidentiality clauses to protect the company’s confidential information.

Partnership agreements in the context of startups

In the context of technology companies, these agreements are used to regulate the relationships between partners, especially between founding partners, who contribute technology and knowledge, and investors, who provide capital for growth.

Although there is no legal definition of “startup”, the European Commission defines them as companies characterized by their temporality, their innovation in the development of technology-based products or services, and their potential for growth or scalability. The future Startup Ecosystem Promotion Law is expected to define this concept, provide legal certainty for startups and facilitate investment.

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Are omnilateral parasocial agreements enforceable against the company?

Shareholders' agreements or extra-statutory agreements are a widely accepted tool in the commercial sphere. Its purpose is to regulate the relations between the partners outside the statutes and the social contract. In addition, its validity is fully accepted in our legal system.

The most common clauses in contracts between startup partners fall into three categories:

Organizational agreements: They regulate the composition of the governing body, the majorities required for decision-making, and the partners’ rights to information.

Relationship agreements: They establish exit mechanisms for partners, such as the drag-along right for the majority partner and the tag-along right for the minority partner. They also include stay clauses, preferential liquidation clauses and exit mechanisms for founding partners or employees (good leaver/bad leaver).

Attribution agreements: They regulate funding obligations, the transfer of technology to the company and non-competition.

Although the most efficient way to make a partnership agreement enforceable is to incorporate its content into the company’s bylaws, there are legal limitations that prevent this in some cases. It is expected that the new law will allow the deposit of partnership agreements in the Commercial Registry, which would provide greater legal certainty for investors.

Conclusion

Partnership agreements are a fundamental tool for ensuring the success of a merger. By establishing a clear framework for collaboration and mutual understanding, these agreements prevent conflicts, protect the expectations of partners, and facilitate the management of the merged company.

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