When the transaction is just beginning, it can be easy to overlook the financial considerations of the shareholders` pact. You may feel that everyone is working hard and contributing to their fair share. While this may be the case at the beginning of the business relationship, this may not always be the case. It is important to determine the amount of money that each shareholder must first invest in the business. When it comes to starting a business with family or friends, it`s easy to think that nothing can go wrong in the future. You may assume that if you trust yourself, you do not need to enter into a shareholder pact — you might think that asking for a shareholder pact makes you think you don`t trust or respect your new trading partners. Decisions related to the unanimous authorization obligation generally include the issuance of new shares or bonds, the change in the capital structureStructure of capital refers to the amount of debt and/or equity used by an entity to finance its activities and to finance its assets. The structure of capital, the appointment or removal of directors and changes in major business activities. Despite the advantages of minority shareholders, the requirement for unanimous approval also has drawbacks. It can slow down the decision-making process and reduce efficiency. For example, when an investor buys preferred shares in a company for $20 each, converted one by one into common shares, and the company then proceeds with a new set of capital increases that values the common shares at $15 each (a decrease), the investor`s shares will be depreciated (economic dilution).
The investor could not convert his preferred shares into common shares without losing $5 per share. An anti-dilution economic provision would protect that investor by stating that if the company issues shares at a lower price than the previous round in which that preferred shareholder invested, it can obtain more common shares if it converts to make a total value. In this SHA clause, the provisions often exceed protection in the legal or standard statutes and provide for provisions of the majority for the approval of certain acts. A super-majority requires a large majority of shareholders (usually 67% or more) to approve significant changes. Standard statutes often require only a simple majority (50%) for many subjects. The majority provisions are protectiantes, because they require a large number of shares to approve issues such as share repurchases, mergers and acquisitions or disposals of assets (including intellectual property), issuance of new company securities, changes in the company`s by-law, adjustments in the number of board members, the underwriting of bonds above a certain threshold and the decision to sell shares to the public, among others.