Investors have long awaited the possibility to conclude a shareholders’ agreement. This has finally been allowed by the amended Law on Companies. Under the amended Law, a shareholders’ agreement may be concluded to specify how shareholders exercise (refrain from exercising) their shareholding rights.
A shareholders’ agreement may set the following obligations for the parties:
- to vote in a certain way at a shareholders’ meeting or to agree on concurrent voting with other shareholders;
- to purchase or dispose of shares at a pre-set price and (or) in certain circumstances to refrain from disposal of the shares before the occurrence of certain events; and
- to carry out concurrent action connected with the management of a company, its activities, its reorganisation and liquidation.
Overall, these amendments should have positive effects, although certain provisions may make their application more cumbersome, such as:
- a company itself cannot be a party to a shareholders’ agreement;
- all shareholders cannot be parties to a shareholders’ agreement simultaneously;
- a shareholders’ agreement should be concluded in relation to all shares that belong to a party to the shareholders’ agreement;
- the obligations under a shareholders’ agreement arise only in respect to its parties, so that violating the agreement cannot be a ground for invalidating company decisions and transactions if these comply with the company articles and Belarusian law;
- there is no clarity on the correlation and hierarchy of a shareholders’ agreement, special legislation, and the company articles.
We consider that the positive effect of a shareholders’ agreement as a means to regulate corporate governance will largely depend on the practice of its application. In any case, we hope that the possibility to conclude a shareholders’ agreement should make the corporate legal environment more understandable and predictable for investors.