Before there’s conflict, not after.

The ideal time is when:

– you’re bringing on your first investor

– a co-founder is getting equity

– someone new joins the shareholding.

As the business evolves, it’s worth revisiting the shareholders’ agreement. Businesses change. So do people.

Consider this real-life scenario.

Two companies, let’s call them MajorCo and MinorCo, are majority shareholder and minority shareholder respectively in another company (Target Company).

The people behind MajorCo and MinorCo used to get along until MajorCo went through a change in management.

There was no shareholders’ agreement for the Target Company.

MinorCo had been running the day-to-day operations of the Target Company, but with the new management in MajorCo, they suddenly found themselves sidelined. Buying out MajorCo’s shareholding in the Target Company didn’t seem feasible. Selling out wasn’t viable either.

If a shareholders’ agreement had been in place, it could have included:

• terms for dealing with management changes in either parties
• exit options if relationship breaks down
• reserved matters giving minority a say in key decisions
• a clear framework for how the business would be run, regardless of who was in charge elsewhere

It’s not always an easy conversation, but it’s often a necessary one.

If you’re about to bring in a shareholder (or you’re one without an agreement), this is the kind of thing worth sorting out before it gets messy.

#malaysiancorporatelawyer

#mergersandacquisitions

#founders

This post was first posted on LinkedIn on 5 May 2025.