Shareholders' Agreement: Why Draft It From Day One

Quick answer. A shareholders' agreement is a confidential contract, separate from the bylaws, that organises the relationship between founders: who decides, how people enter and leave the capital, and what happens in case of deadlock, departure or resale. Signing it at incorporation, while everyone gets along, prevents most disputes because the rules are set before there is a disagreement, not during one.

At incorporation, enthusiasm dominates and no one wants to talk about a possible divorce. That is precisely the problem. The shareholder disputes we see in client files almost always arise from a situation no one had planned for: a founder who wants to leave, another who stops contributing, a buyout offer, a 50/50 deadlock that paralyses the company. Without a written rule, each side defends its position and the company suffers.

This article explains what a shareholders' agreement actually settles, how it differs from the bylaws, and why the timing of signing changes everything. The goal is not to turn you into a lawyer, but to give you the right reflex at the right moment.

The bylaws are the founding, public document filed with the registry. They set the essentials: corporate form, capital, purpose, governance rules enforceable against everyone. The shareholders' agreement is an extra-statutory contract: it lives alongside the bylaws, stays confidential between the signatories, and organises in detail points the founders prefer not to expose publicly.

In practice, the two documents complement each other. Some clauses belong in the bylaws to be enforceable against third parties (for example pre-emption or approval clauses in a SAS), others stay in the agreement to remain discreet (presence commitments, remuneration allocation, sale undertakings). This is one of the first trade-offs to settle, and it deserves real advice: the same objective does not carry the same legal force depending on whether it sits in one document or the other.

A good agreement anticipates the moments when shareholders' interests diverge. Here are the topics we see come up most often in dispute files.

A shareholder's exit#

This is topic number one. What happens when a founder wants to sell, or simply leaves? Without a clause, they can transfer their shares to anyone, including an unwanted third party, and the price becomes a battle. The classic tools:

• Pre-emption right: the other shareholders can buy the transferred shares as a priority.
• Approval clause: any transfer to a third party must be approved.
• Tag-along / drag-along clauses: if a majority shareholder sells, minority holders can sell on the same terms, or must follow.
• Sale undertakings linked to a departure (the familiar case of the founder who leaves the project).

Deadlock and disagreement#

Capital split into equal shares with no unlocking mechanism is a time bomb. The agreement can provide for a mediation procedure, an organised withdrawal right, or so-called forced buyout clauses when the disagreement becomes irreconcilable. It is far better to describe the way out of a crisis when there is no crisis.

Commitment and allocation#

A shareholder who contributes time and another who contributes money do not have the same expectations. The agreement lets you formalise presence commitments, non-compete clauses, vesting targets (progressive acquisition of shares over time), and how remuneration and dividends will be allocated. These are difficult conversations to have later, easy to frame at the start.

The right time is before the dispute#

When founders get along, they negotiate balanced rules because no one yet knows which way the knife will fall. Once a conflict is in place, every clause becomes a power struggle, and very often the agreement is never signed. Our reading is simple: an agreement negotiated cold protects everyone; an agreement negotiated hot does not get signed.

The underestimated risk: believing the bylaws are enough#

Many founders think well-drafted bylaws keep them safe. That is a common mistake. The bylaws set the framework, but they say nothing about what happens when a founder disengages, when their shares must be bought back, or when an investor enters the capital. The agreement fills that gap. To go further on how the two documents interact, see our analysis on drafting the bylaws of a SAS and the detailed inventory of the 15 essential clauses of a shareholders' agreement.

The agreement's strength and its limits#

You have to be clear-eyed about legal scope. The agreement has purely contractual force: it binds its signatories, but its reach is in principle limited to the parties who signed it. According to settled case law, breaching an agreement triggers the contractual liability of the party at fault and opens a right to damages, and possibly to specific performance under article 1221 of the French Civil Code; it does not, however, in principle void the transaction concluded with a good-faith third party. In other words, a transfer made in breach of the agreement may remain valid towards the third party, with the breaching signatory then having to compensate the loss. That is why the most sensitive clauses are often better relayed into the bylaws, where they become enforceable against everyone.

This is the central trade-off and it depends on the corporate form. In a SAS, statutory flexibility is broad, which allows strong clauses (pre-emption, approval, exclusion) to be placed in the bylaws. Be careful, though, about the majority rules for adopting or amending those clauses:

• In a SAS, since the PACTE law (law no. 2019-486 of 22 May 2019), article L227-19 of the French Commercial Code reserves a decision by unanimity of the shareholders to the adoption or amendment of only the inalienability clause (article L227-13) and the change-of-control clause (article L227-17).
• Still in a SAS, the approval clause (article L227-14) and the exclusion clause (article L227-16) may now be adopted or amended only by a collective decision of the shareholders taken in the conditions and forms set out in the bylaws: this is no longer a unanimity rule, but whatever the bylaws themselves have fixed.

This point changes the strategy: what requires unanimity is very hard to amend later, so it must be calibrated carefully from the start. Conversely, what falls under a collective statutory decision can be adapted according to the majority you have provided for. The right reflex is to decide, clause by clause, whether you are seeking the confidentiality of the agreement or the enforceability of the bylaws, and to check the impact of the applicable majority rule.

In two- or three-founder incorporation files, the scenario recurs regularly: one shareholder disengages after a few months, keeps their shares, and keeps receiving dividends without contributing anything more. Without an agreement, the remaining shareholders have no leverage to recover the shares. With an agreement providing for vesting and a sale undertaking linked to departure, the shares return to the capital at a price defined in advance. The difference between the two situations is counted in years of litigation and thousands of euros in fees.

1. List, cold, between founders, the exit and deadlock scenarios you fear most.
2. Decide for each topic whether it belongs in the bylaws (enforceability) or the agreement (confidentiality).
3. Calibrate the majority rules, keeping in mind what requires unanimity in a SAS.
4. Have the agreement drafted or reviewed by a professional: a generic template misses your situation.
5. Sign before investors come in, who would otherwise impose their own version.

A shareholders' agreement is not a document of distrust, it is a document of maturity. Founders who sign it from day one are not preparing for a fight: they are making sure that, if the road splits one day, it splits cleanly. In files where it exists, disputes are resolved in weeks; in those where it is missing, they drag on. It is one of the best cost-to-protection ratios in a company formation, and one of the most neglected.

We support this work as part of forming your company and our firm's legal support, in coordination with tax trade-offs between shareholders (remuneration, dividends, holding structures). When wealth structuring comes into play, it is often relevant to align the agreement with a reflection on whether to set up a holding company between founders.

• Conditions for transferring shares (pre-emption, approval, tag-along).
• Fate of the shares if a founder leaves (vesting, sale undertaking).
• Unlocking procedure in case of disagreement.
• Presence commitments and non-compete clause.
• Allocation of remuneration and dividend policy.
• Allocation of management roles and decision rules.
• Clause-by-clause trade-off: bylaws (enforceable) or agreement (confidential).
• Check of the majority rules applicable to each clause.