Shareholders’ agreement for minority shareholders

Drafting

Today’s post is about provisions in shareholders’ agreement for the benefit of minority shareholders.

It is common to have a shareholders’ agreement when an M&A transaction results in more than one shareholder in the target company.

Some provisions to include in a shareholders’ agreement for the benefit of a minority shareholder include:

1. The minority shareholder to have board representation. This includes the right to appoint and remove director(s) nominated by the minority shareholder.

2. The minority shareholder to have the first right of refusal in the event the majority shareholder intends to dispose the majority shareholder’s shares.

3. The minority shareholder to have tag along rights in the event of disposal of the majority shareholder’s shares to a third party.

4. Have a list of board reserved matters, which cannot be passed without unanimous consent of the board of directors or without the vote of the director nominated by the minority shareholder.

5. Have a list of shareholders reserved matters, which cannot be passed without unanimous consent of all shareholders or without the minority shareholder’s vote.

6. The minority shareholder to have a representative as a bank account signatory to authorise bank transactions which exceed certain threshold.

What would you add to the list above?

#malaysiancorporatelawyer
#shareholdersagreement
#mergersandacquisitions

This post was first posted on Linkedin on 25 August 2021.

Linkedin Post
M&A Specialist and Generalist

I didn’t fully appreciate how specialised and broad M&A practice is until I found myself thinking about how various legal issues discussed in the articles I read apply to M&A transactions. While reading an article on whether consideration is required for the variation of contracts, I was reminded of a …

Linkedin Post
Exclusivity when negotiating an M&A deal

If you are a buyer negotiating to acquire business or shares of a company, you would want to ensure that you do not incur costs during the negotiation only for the seller to end the negotiation and sell to another party. A buyer would want to ensure that the seller …

Linkedin Post
Material Adverse Effect (“MAE”) Clause in M&A Transactions

I came across the following definition of “MAE” from the American Bar Association’s Canadian Private Target M&A Deal Point Study: “MAE” means any result, occurrence, fact, change, event, or effect that has, or could reasonably be expected to have, a materially adverse effect on the business, assets, liabilities, capitalization, condition …