50 NEWSLETTER 2021 In the absence of a shareholders’ agreement, the rules set by the applicable law are sometimes inadequate and uncertain, and sometimes slow, in resolving disputes between family members. Maybe more importantly, when setting the general rules, it is not possible for the applicable laws to address the relevant family dynamics and the unique values of a given family. Which Issues are Regulated in Shareholders’Agreements? Although the content of shareholders’ agreements varies from family to family, and from company to company, certain provisions are common in practice. Like every agreement, these agreements start with a general purpose clause, and by providing information about the history of the relationship, as well as by revealing the current shareholding structure as of the date of signature. The issues regulated thereafter shall be explained under each main heading below. After the regulation of these issues, the agreement usually ends with confidentiality, applicable law and dispute resolution method, prohibition to transfer, and similar standard provisions. Share Capital and Share Groups It is usual practice to grant shares from different groups to various family members who are shareholders in the company, considering the amount of their shares in the company, their role in the management of the company, the efforts they have put in, and continue to put in to the business, and the capital they contributed to the company. These share groups are particularly effective in determining the management style and dividend distribution policy of the company, as well as in regulating share transfer restrictions. In addition, upon a decision for any capital increase, the statutory pre-emptive right is frequently repeated in the shareholders’ agreements in order to prevent dilution of the existing shareholders and impairment of their rights. Within the scope of this right, regulations specific to share groups are generally included.
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