Shareholder agreements: why every startup should have one before growing?

The shareholders agreement is one of the most strategic documents a startup can have. However, it's common for founding teams to incorporate their company and indefinitely postpone formalizing the agreements among themselves. This postponement has consequences that often become apparent at the worst possible time.

What is a Shareholders Agreement and why is it key in a startup?

It is a private contract between shareholders that regulates aspects beyond the company's bylaws. While the bylaws are public (registered with the Registry), the shareholders' agreement is private and only binds those who sign it. It allows for the confidential regulation of aspects that should not be made public: vesting, investment conditions, and the rights of founders versus investors.

Essential clauses for startups

Founder Vesting

Vesting gradually consolidates each founder's stake based on time or the achievement of milestones. It protects the company and co-founders from situations where a partner leaves early but retains their entire stake.

Standard scheme: 12-month cliff + monthly vesting for an additional 36 months (total: 4 years).

Drag along and tag along

Drag-along allows majority shareholders to bring minority shareholders into a sale to a third party. Tag-along guarantees minority shareholders can join the sale on the same terms.

Anti-dilution and liquidation preference

They protect certain shareholders from dilution in future rounds, and establish the order and conditions of distribution in case of exit or liquidation.

Non-competition and confidentiality

The founders' obligations include not competing with the company during their involvement and for a subsequent period, and maintaining confidentiality regarding sensitive information.

The most common conflicts in startups don't arise between founders and customers: they arise among the founders themselves. A well-drafted shareholders' agreement, signed before the first conflict, is the most effective tool for managing these tensions.

The ideal time to sign it: before the first external investor, before the business generates significant revenue, and—above all—before the first tensions appear.