by ACI Partners

Legal Digest25 October 20230 comments

Legal Amendment in the Relationships Between Shareholders and Founders of Commercial Companies – Amendment to the LLC Law: Part I – Corporate contract

Introduction
One of the significant changes involves the introduction of a new Article 47 1 in Law 135/2007, concerning the corporate contract (i.e. shareholders’ agreement). Through this instrument, shareholders are provided with the opportunity to exercise their corporate rights, both among shareholders (all or at least two), as well as between shareholders and third parties.
Corporate contracts are widely known and applied worldwide, and their implementation in national law will promote the influx of investments, provide investors with a higher level of investment protection, ensure better business management, overcome corporate blockages, and enable multiple decision-making options.

Concept
Two or more shareholders may enter into a contract regarding the manner in which the rights and obligations of the shareholders of a limited liability company are to be exercised.

Elements of the Corporate Contract

Form: The contract is to be drawn up in writing.

Content: Through the contract, the signatories may assume obligations to exercise their rights in a specific manner or refrain from exercising them. The contract may include obligations to vote in a specific manner when making decisions within the company’s bodies, buy and/or sell company shares under certain conditions, at an agreed or determinable price, or to abstain from transferring shares, to commit to specific actions regarding the company’s management, restructuring, or cessation of activities, or to abstain from performing them, or to exercise other rights or fulfill other obligations.

Additionally, signatories of the corporate contract, which involves economic coordination operations, are required to notify the Competition Council, in accordance with competition legislation, before implementing these actions.

The content of the contract is confidential unless the law or the contract itself stipulates otherwise. However, at least one of the signing shareholders is obligated to inform the company in writing and within a reasonable timeframe about the existence and duration of the contract.

Effects: The corporate contract only affects the parties to it. Non-performance of the contract does not affect decisions made by the company, but it allows the interested shareholder to protect their rights and interests under contractual liability.

Except in cases where the contract is concluded among all shareholders, does not violate clearly imperative norms and does not pertain to the rights of third parties, the breach of contractual obligations related to the exercise of rights in the company cannot serve as a ground for the annulment of company decisions made contrary to the contract provisions.

Notation
To guarantee the rights agreed upon in the corporate contract, the interested party may notify the state registration authority, which will include the relevant inscription in the State Register. This provides a guarantee for the use of legal instruments such as purchase and sale option contracts, the drag-along and tag-along options, contractual preemptive rights, etc.

Relationship with Third Parties
There is a particular interest in the application of this instrument by creditors of the company, both existing and potential. By entering into such a contract, creditors will obtain an additional mechanism for guaranteeing their interests in the financing of the business and the granting of credit. In this regard, creditors can, through a contract with shareholders (not just the company), agree on the assumption of certain obligations by shareholders (to exercise their rights in a specific manner or to refrain from doing so) to secure their claims.

Dispute Resolution
Disputes arising from the corporate contract are to be resolved in accordance with the provisions of the Civil Code regarding the performance of obligations, including through arbitration if established in the company’s founding documents (as part of the reform).

Related Regulations
For the harmonization of the legal framework, similar to what was described above, it is also proposed to include Article 23 1 “Corporate Contract,” to Law No. 1134/1997 on joint-stock companies.