SHAREHOLDERS’ AGREEMENTS IN GREECE

Shareholders' Agreements are written agreements between the shareholders or partners of a company concerning its operation. They are a very widespread practice abroad, with many countries having incorporated them into their legislation, often stipulating the content that they must contain. In contrast, the Greek legislator has not provided any specific provision regulating these agreements, and Greek case law offers very few relevant decisions.

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CONTENT OF SHAREHOLDERS’ AGREEMENTS

The content of these agreements varies and is freely determined by the will of the partners, who can agree on practical matters not covered in the company's articles of association or even formulate a situation that differs from what is outlined in the articles of association.

As mentioned, in Greece, unlike in other countries, the legislator has neither provided for nor incorporated Shareholders’ Agreements into Greek commercial legislation. This means that the general provisions of the Civil Code apply, and the content is determined by the partners on the basis of the principle of freedom of contract.

Indicatively, in practice, Shareholders’ Agreements usually regulate voting right issues in a company, management issues, the exercise of internal policies and decision-making with financial impact.

Regarding voting rights, all of the partners or a group of them may agree on a common voting policy at General Assemblies, deciding jointly and in advance on how to vote. On the other hand, it is common for such agreements to exclude one or more partners/shareholders from voting, making them an effective tool for controlling the company.

In addition, through these Agreements it is possible to make decisions regarding the management and representation of the company. It is also common to provide for pre-emptive rights in the event of a partners/shareholders’ exit from the company. In other words, it is agreed that if one of the partners/shareholders leaves the company, they must first inform and notify the remaining partners/shareholders of their intention to exit and the amount of money they require as renumeration for their shares. The notification of the offer to third parties will only take place if there is no interest from any of the shareholders/partners.

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SHAREHOLDERS’ AGREEMENTS AND ARTICLES OF ASSOCIATION

A company's statute is the instrument that regulates its operation, while its provisions are of a quasi regulatory nature. The purpose of Shareholders’ Agreements is to supplement companies’ statutes by means of agreements that are not reflected in the provisions of said statutes or cannot be provided for in them. Issues may arise when the provisions of the Shareholders’ Agreements conflict with the provisions of the statutes.

Although Greek case law on this issue is minimal, the courts' position is that the provisions of the Articles of Association, due to its quasi regulatory character, combined with the fact that it constitutes a constitutive act for which publication is required, take precedence over the agreements between the shareholders/partners. Shareholders’ Agreements are limited to their binding nature, and the breach of any of the agreed terms creates a claim for damages, as mentioned below, without raising the issue of annulment of decisions or acts that contradict their terms.

However, it has been argued that in some cases, where corporate interest prevails, the content of a Shareholders’ Agreement may lead to the invalidity of a Company decision even if it does not violate a provision of the Articles of Association. In other words, it has been argued that where a Shareholders’ Agreement is signed by all shareholders/partners and within the agreement it is agreed that a particular proposal will be voted by the GA , the violation of its content by a shareholder/partner creates a right for their counterparties/shareholders to seek annulment of the GA decision in court.?

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PENALTY CLAUSES

As discussed, the nature of the Shareholders’ Agreements is contractual in nature and therefore the breach of the terms set by the parties therein gives rise to a claim for damages. In practice, however, due to the nature of the content of these Agreements, the valuation of damages in the event of a breach of any of their provisions is difficult to assess moneywise.

For this reason, it is standard practice for the partners/shareholders to include penalty clauses precisely specifying the amount a party will owe in case it fails to comply with what has been agreed. This allows the parties to know in advance the exact compensation they may be required to pay and accept it. These clauses therefore strengthen the institution of Shareholders’ Agreements and make them more binding.

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CONCLUSION

Shareholders’ Agreements are a very important means of regulating the operations and relationships of a company. They offer partners/shareholders the opportunity, in addition to the provisions of the articles of association, to agree and provide for provisions necessary for the smooth and uninterrupted operation of the company, avoiding the problems that would arise from possible "loopholes" in the law or the articles of association.

Nexus Law Firm specializes in drafting Shareholders’ Agreements and providing proper legal guidance to our clients as to their content, so that they fully address the needs of a company, protecting the interests of both the company and its partners/shareholders.