Even if there is a blocking agreement, investors who are not insiders of the company may be affected as soon as this blocking agreement exceeds the expiry date. When the blockages expire, the company`s insiders will be able to sell their shares. If many insiders and venture capitalists are looking for an exit, this can lead to a dramatic fall in the price due to the huge offer of shares. A shareholders` pact can be concluded by the creation of the company or at any time thereafter. There is no legal obligation for all shareholders to enter into the contract, but this is generally preferable. Future shareholders can join the shareholders` agreement by simple loyalty agreement. The lock-in agreements are designed to protect investors. The lockout agreement aims to avoid a scenario in which a group of insiders makes a company public overvalued and rejects it on investors and runs away with profits. Those considering investing in the business should determine the length of the prohibition period. This is because insiders who sell part of their shares can put downward pressure on the company`s stock. Flexibility: A shareholder contract is a flexible vehicle that can be easily adapted to the changing needs of the parties. Constitutional documents can only be amended by a special resolution of the members, with the amendments to be communicated to the Registrar of Companies.
However, a shareholder contract can be amended with relative ease with the agreement of the signatories. Confidentiality: Many of the provisions contained in a shareholders` pact could be adequately addressed in the company`s constitutional documentation. Although the company`s constitutional documents are publicly available, the shareholders` pact is a private document. The shareholders` pact is therefore a more appropriate instrument for dealing with confidential, economically sensitive or internal matters within the company. Management: The shareholders` pact may entrust a protected shareholder with certain controls over the management of the company. For example, the shareholder may be allowed to appoint representatives to the board of directors or veto certain decisions or transactions.