While a business is small, partners often agree verbally. Problems appear later: one wants to leave, another has stopped working, a third has received an offer to sell their share. A shareholder agreement lets you set the rules for such situations in advance.
For an LLC (TOV), such an agreement is expressly provided for by Article 7 of the Law of Ukraine “On Limited and Additional Liability Companies”. We help formulate arrangements on voting, profit distribution, contributions, exit and sale of shares, as well as options for key employees and advisers. For teams preparing for investment, we take typical investor expectations into account.
When to seek help
- You are founding a company with one or more partners
- Partners make different contributions: money, work, technology, connections
- You want to motivate key people with a share or an option
- You are preparing for an investment round
- Disagreements over management are already emerging between partners
What the lawyer does
Talking to each partner
Separately and together, we discuss each partner's expectations, roles, contributions and the scenarios they are concerned about. This is the basis for an agreement that will actually work.
Proposing mechanisms
We explain the available tools — vesting and cliff, good/bad leaver, drag-along and tag-along, pre-emption rights, deadlock resolution — and help choose the right ones.
Drafting the agreement and charter changes
We draft the shareholder agreement and, if necessary, make agreed changes to the charter so that the documents do not contradict each other.
Setting up options
We develop an option agreement or a team option programme: size, vesting conditions, exercise procedure, and the tax issues worth discussing with your accountant.
Supporting the signing
We agree the final version with all parties, organise the signing and explain how to act when an event provided for in the agreement occurs.
Documents to prepare
- Charter and Unified State Register (USR/ЄДР) extract
- Current share distribution and plans to change it
- Description of each partner's role and contribution
- Existing arrangements: correspondence, term sheet, memorandum
- List of people intended to receive options and the desired terms
What you get
- A shareholder agreement approved by all members
- Agreed changes to the charter, if needed
- An option agreement or option programme regulations
- A memo: which events trigger which mechanisms of the agreement
Frequently asked questions
Can a shareholder agreement be concluded if the company is already operating?
Yes. The agreement can be concluded at any time if all its parties agree. It is often in an operating company that it becomes clear which issues really need rules: profit distribution, new members, a partner's exit. If the arrangements require changes to the charter, we make them at the same time so that the documents remain consistent.
How is an employee option set up in Ukraine?
Most often it is an agreement under which the company or a member undertakes, on certain conditions, to sell a share or part of it to the employee at a set price. Vesting conditions, grounds for losing the right and the exercise procedure are set out in detail. If the team works through a parent company abroad, the option programme may operate at its level, in which case we coordinate with local counsel.
What happens if a partner breaches the agreement?
An agreement cannot rule out conflict, but it determines how to resolve it. It can provide for penalties, an obligation to sell a share under an agreed formula and a deadlock resolution procedure. Performance of a shareholder agreement can be enforced through the courts. How effective the protection is depends on how precisely the terms are worded.