The unanimous shareholders' agreement

The unanimous shareholder agreement allows shareholders, under corporate law, to restrict or withdraw, in whole or in part, the decision-making powers of directors. Unlike "regular" shareholder agreements, unanimous agreements automatically apply to any new shareholder of the corporation. This restriction on the powers of the board of directors can be expressed in several ways, of which we offer an overview.

1. Shareholder approval

By unanimous agreement, the shareholders can make certain decisions subject to shareholder approval, given by resolution. For example, the power to authorise a new issue of shares could be made subject to the shareholders approving such an issue. Without shareholder approval, the board of directors could not proceed.

2. Decisions taken by the shareholders

Instead of decisions being approved by the shareholders, they could instead, by unanimous agreement, choose to have certain decisions made by themselves directly. In such a case, the shareholders could meet in a special meeting (or sign resolutions in lieu thereof), in order to pass a resolution authorising a share issue, even without going through the company's board of directors.

Furthermore, the shareholders will be able to determine the thresholds required to take decisions that are withdrawn from the board of directors. For example, a unanimous vote of the shareholders could be required to wind up the company, or a two-thirds threshold to authorise a new share issue. Voting could be based on the number of votes held by each shareholder.

3. Instructions to the Board of Directors

Instead of reserving certain powers for themselves, the shareholders can force the board of directors to take certain decisions. For example, the shareholders could restrict the powers of the board of directors to make annual appointments of the officers desired by the shareholders. Without such an agreement, the board has complete discretion over these appointments.

4. Ability to link voting rights

In contrast to directors, shareholders have the right to bind their voting rights on matters specified in the agreement by agreement. The unanimous agreement can be an interesting tool to remove certain powers from the board of directors, and then to bind the shareholders' vote on these matters.