Incorporating a company is a major step. But what truly determines whether the venture grows with stability—or becomes a source of tension—is how decisions are made, how money is managed, and what happens when a shareholder wants to come in or exit. In this context, the shareholders’ agreement is an essential legal instrument for your business.
A shareholders’ agreement is the preventive tool par excellence to set clear rules before corporate-level disputes arise. When properly designed and, under the principle of party autonomy, it provides greater legal certainty and helps preserve the shared project.
1) What is a shareholders’ agreement?
Shareholders’ agreements (also referred to as parasocial agreements) are defined as arrangements entered into by some or all shareholders for the purpose of supplementing, specifying, or modifying—within their internal relations—the statutory and bylaw rules governing the company. Their legal basis is found in Article 11 of Llei 20/2007, of 18 October, on public limited companies and private limited companies.
2) Articles of association and shareholders’ agreement: how they fit together (and why they cannot contradict each other)
The articles of association are the company’s organisational and operating rules. And when they must be amended, the law requires a formal route: a shareholders’ meeting resolution, its elevation to a public deed, and registration with the Companies Register, the latter having constitutive effect.
A shareholders’ agreement, by contrast, allows the parties to set more granular and strategic rules—often confidential in nature (for example: corporate governance, investment terms, shareholder entry/exit, confidentiality, dispute resolution)—without overburdening the articles. But there is one golden rule:
The articles and the shareholders’ agreement must form a coherent system. If they contradict each other, the conflict is not usually resolved—it is multiplied. What matters is knowing what to regulate, where, and how.
3) Classic typology of shareholders’ agreements: organisation, allocation, and relationship
(i) Organisational covenants
Define how the company is governed.
(ii) Allocation covenants
Allocate rights, burdens, and benefits.
(iii) Relational covenants
Regulate conduct among shareholders.
4) What it is for: what it protects and what it organises
A well-designed agreement typically covers—without being exhaustive—five key areas:
A) Governance and decision-making
Who decides, what is decided, and how decisions are made.
B) Money: contributions, funding, and dividends
Future contributions, shareholder loans, financing rules, and dividend policy.
C) Entries and exits
Pre-emption rights, sale rules, tag-along/drag-along provisions, exit scenarios in the event of conflict, and valuation methods for the transfer of shares/units.
D) Protection of the business
Confidentiality, non-compete obligations, intellectual/industrial property, and other relevant assets.
E) Dispute resolution
Escalation mechanisms and staged procedures for resolving disputes.
5) Common mistakes (that later become expensive)
- Signing a “standard” agreement without tailoring it to the business’s real model.
- Contradicting the articles and the law itself: the system becomes unstable and open to challenge.
- Ignoring enforceability against the company/third parties (notice + express acceptance): the shareholders’ agreement will only be enforceable against the company or third parties if it has been notified and expressly accepted.
6) How we work: a bespoke agreement—clear and enforceable
As a protection tool, a shareholders’ agreement combines technical rigor with business insight.
Our approach is structured in three phases:
- Diagnosis: shareholders, contributions, control, risks, and scenarios (entry/exit/investment).
- Architecture: what belongs in the articles and what belongs in the agreement (overall coherence).
- Drafting and negotiation: clarity, balance, and enforceability.
—
At Carlota Pastora Business Law Firm & Wealth Planning, we have extensive experience in drafting and negotiating bespoke shareholders’ agreements aligned with your interests, your company’s structure, and the applicable legal framework in Andorra. We advise and design clear, strategic, and enforceable documents intended to prevent disputes and protect the value of the business project. Contact us to review your case.
Frequently Asked Questions
No. It is not a constitutive requirement for incorporation. It is used as a preventive instrument to organise relations among shareholders. Having one is strongly advisable.
It increases the risk of dispute and of practical ineffectiveness. It is also important to remember that corporate resolutions contrary to the law or the articles may be challenged.
The agreement binds those who sign it. For it to be enforceable against the company or third parties, the law requires notification and express acceptance.
A poorly designed agreement can be almost as dangerous as having none. In such cases, the advisable course is a legal audit and an alignment with the company’s current reality—either by amending the existing agreement or executing a new one.
In the absence of adequate regulation, the company faces significant risks in three key areas: (i) decisions (deadlocks, de facto vetoes, insufficient majorities for critical matters), (ii) money (disputes over future contributions, funding, and profit distribution), and (iii) exits (disorderly sales, entry of unwanted third parties, valuation and transfer conflicts). In practice, this translates into lost time, economic cost, and—often—irreversible deterioration of the relationship among shareholders, with a direct impact on the value of the business.
