By: Luis Gerardo Ramírez Villela
A shareholder’s agreement is a document that outlines the structure of how the shareholders have decided to operate a company, and which includes rights and obligations to each of them.
Shareholders’ agreements are frequently used to reflect certain terms and conditions between existing shareholders or upon the incorporation of a new company, and there is no specific regulation for these types of agreements under Mexican law.
These agreements are used to create specific guidelines to be followed by the shareholders and unlike a company bylaw, the shareholder agreements focus on such rights and obligations but might not cover all specific topics as provided under the Mexican General Law of Commercial Corporations (Ley General de Sociedades Mercantiles) or any other applicable laws.1
As similar as joint venture agreements, the shareholders’ agreements usually include business objectives, initial contributions, day-to-day operations responsibilities and profit distribution structure. Likewise, specific dispute resolution clauses must be included to make sure an appropriate mechanism to dissolve the shareholders’ agreement in any specific scenario.
It should be noted that the shareholders’ agreements require no formalization before a Notary Public, nor registration, and may be executed privately between the parties, without any other responsibility than to reflect the terms and conditions thereunder in the corporate by-laws of the corporation.
Besides the shareholders’ agreement, the most important document will be the corporate by-laws that will set out all the rights and obligations of each of the shareholders in compliance with applicable laws.
As previously mentioned, the corporate by-laws must contain the provisions negotiated under the shareholders’ agreement, including but not limited to (i) capitalization, (ii) management (including Board members and appointment of key officers), (iii) shareholders/partners meetings (including specific voting requirements for specific scenarios), (iv) limitations on transfer of shares/equity interests, and (v) dispute resolution mechanisms, amongst others.
In all events, the corporate by-laws must comply and contain all standard provisions applicable to the type of incorporation in which the agreement will be instrumented and implemented.
Those provisions include, amongst others, the following: (i) corporate name of the corporation; (ii) duration of the corporation; (iii) capital stock distribution of the corporation (including different series and classes of shares); (iv) corporate domicile; (v) type of management (Board of Directors or Sole Manager); (vi) profit and losses distributions; (vii) statutory legal reserve; and (viii) dissolution and liquidation procedure.
1 Please note that other applicable laws may apply to agreements related to civil associations.
