Shareholders agreements and holding structures

What is happening

Two founders are bringing in a third partner with capital, and each of them reads the terms differently: who appoints the director, what happens if the investor wants out, whether a stake can be sold to a competitor. So far all of this has only been agreed verbally.

A family business has grown into several companies registered to different relatives. Property, staff and trade marks are spread across them at random, and the owner wants to put things in order without disrupting operations.

The business has two equal owners, and both fear deadlock: if they disagree on a key issue, no decision will be taken at all. They need a mechanism for breaking the deadlock agreed in advance.

What the law says

• Shareholders agreements are governed by the Civil Code: participants can agree how they will vote, how decisions are to be coordinated, and how stakes are sold and exits handled. Third parties such as lenders or investors may also be parties.
• Specific rules for LLCs are set out in Federal Law No. 14-FZ of 8 February 1998 "On Limited Liability Companies", and for JSCs in Federal Law No. 208-FZ of 26 December 1995 "On Joint-Stock Companies".
• A shareholders agreement binds only its parties. Where all the participants have signed it, a breach can be a ground for challenging a decision of a company body. That is why we mirror the key rules in the charter wherever the law permits.
• For transactions in stakes, the option to conclude a contract and the option contract provided for by the Civil Code are used to set out buy-out terms, investor exits and compulsory sales of a stake.
• Tax consequences matter when building a holding structure: the Tax Code allows a zero rate on dividends within a group where conditions on the size and duration of the holding are met, while arrangements without a business purpose may be recharacterised by the tax authorities.
• Within a group, funding is often provided as a contribution to the company's property, which does not increase the charter capital; the terms of such contributions are best fixed in the charter and the shareholders agreement.

What we do

• We interview the partners separately and together, find where their expectations match and where they diverge, and set this out in a clear term structure.
• We draft the shareholders agreement: governance and voting, consent to transactions, information rights, profit distribution and restrictions on selling stakes.
• We build in mechanisms for deadlock, buy-outs and investor exits, and the method for fixing the price.
• We bring the charter into line with the agreement and handle registration of the changes.
• We design the group structure: which companies hold the assets, which run the operations, and how they are linked by ownership and contracts.
• We manage the transition to the new structure: share transactions, transfers of property, corporate resolutions and registration.

What we will need from you

• Charters and register extracts for every group company, and a chart of the current ownership.
• Any existing arrangements between the partners, including letters and notes of negotiations.
• A list of the key assets and the company that holds each: property, trade marks, licences and contracts.
• Details of loans, pledges and obligations that may restrict moving assets around.
• Your plans for the next few years: bringing in an investor, selling the business, passing it to heirs or dividing it between partners.