Posted on April 8, 2021
Bidding Clause Shareholders Agreement
Do you remember 2005, when Mark Zuckerberg watered down Facebook co-founder Eduardo Saverin`s share on Facebook and fired him from the company? You never know when a friendly relationship can get upset. That is why it is always wise, for any practice with several shareholders, to sign a shareholder pact to protect your interests along the way. Non-compete clauses are often included in shareholder contracts. By specifying when and how a shareholder may engage in competing activities during and after having been a shareholder of the company, it removes any ambiguity that may result from the absence of explicit restrictions. The reason for controlling the external efforts of shareholders is that the best knowledge of the intellectual property or the management system of the company, which are essential to maintain the company`s lead, must remain confidential, regardless of the arrival and the course of the shareholders. In the shareholders` pact, the backs and don`ts, including the extent and duration of these restrictions, should be noisy and clear. It is imperative that the shareholders` pact includes a non-compete clause or that there is no point in crying over the milk spilled when a shareholder exploits the loophole and reveals the company`s business secrets. Note, however, that non-competition clauses must be appropriate to ensure their applicability. If they are excessively restrictive or overly broad, the Tribunal may decide that such a clause does not affect the shareholder. Perhaps you have other thoughts on the conclusion of a shareholder contract, to think, „It sounds good, but maybe my company doesn`t need it.“ The truth is that every working relationship starts with the best of intentions, but we simply cannot guarantee how things will end.
These would be some of the much-loved mechanisms that shareholders seek and that are generally included in most shareholder agreements. These clauses are intended to protect existing shareholders from the involuntary dilution of their interest in the company.