In essence, it sets the rules that govern the relationship between shareholders and the company and with each other. A non-compete clause prohibits shareholders from competing with the group while they own the group and for a short period after leaving the group. In a small business, customers work closely with shareholders. A non-compete clause prevents an influential or former shareholder from attracting customers out of the group. A shareholder who leaves the group may also have confidential information that can be used to the benefit of the group. Pre-emption rights give existing shareholders the right to purchase newly issued shares from the company before being sold to third parties. This protects existing shareholders by allowing them to retain their share of the company. The disadvantages of pre-emption rights are that they can cause long delays in the sale of shares and may discourage demanding institutional investors from investing because they can obtain a lower proportional share of the company than they would like when pre-emption rights are exercised. It depends on the knowledge and trust of the shareholders. If you suspect that one or more shareholders might deny, have seen or signed, perhaps all signatures should be shown.
Private companies with multiple shareholders often enter into shareholder-level agreements that define the relationship between shareholders and the company. This entry addresses issues that clients often address through shareholder agreements. (2) One, several or all directors may be exempted, by decision of a general meeting, from the restrictions set out in paragraph 181 of the BGB (a prohibition on entering into transactions on behalf of the company with its own name or as a representative of a third party). Even in companies with few shareholders, a shareholder contract should be created. The contract should be active before the company begins operations to ensure that all shareholders agree on their content. In the event of a vacancy on the board of directors, shareholders may identify alternative or new directors. The vacancy could be temporary or permanent. This clause helps shareholders continue to monitor the appointment of directors if one of the «specified» directors is unable to continue to tick the board of directors. If one of the provisions of this act is null and void, or if it turns out to have omissions, it does not affect the validity of the other provisions. In this case, shareholders are required to agree on a valid provision instead of the unenforceable provision or to respect the absence of a provision which, for economic purposes or which would have been agreed in light of that act, had the parties taken into account the point in question.
A company can exchange shares by buying back from existing shareholders and handing over the stock on behalf of the company. This is especially the case for established companies. As a general rule, it is only made where the group has enough cash to make the purchase while covering the operating costs. The exchange of shares transfers equity to the group and thus increases the future value of the company. However, if shareholders have unequal financial means, one shareholder could declare a price unfairly low, knowing that the other shareholder cannot afford to buy the shares offered.