Costa Rica: Shareholders' Agreement as an Opportunity to Reduce Conflicts

Our lawyers in Costa Rica, experts in Corporate Law, share this article on shareholders ' agreement as an opportunity to reduce conflicts.

Do you, as shareholders of a company, have a customized instrument that reflects and supports how you wish and have agreed to manage your company?

In general, agreements of this nature respond to a private contract through which shareholders, freely and in protection of their best interests, foresee and establish from basic elements of the day-to-day operation of the company, to more complex and sensitive matters, such as the participation of family members, treatment of profits, and the management of potential sale scenarios. In a slightly more colloquial way, we could define it as the mandatory regulations manual, under which shareholders explicitly agree and instruct in writing how they want their company to be managed and operated.

Among the many advantages of said agreements, it stands out that they are adaptable to the conditions and needs of each operation and the dynamics of the shareholders, and can be modified to adjust to the different realities of the company as long as all shareholders agree. In practice, the main aspects that are expressly regulated and foreseen in these agreements, are:

• The dynamics of holding, convening, and voting at General Assemblies and Board of Directors meetings;
• Guidelines for the administration of the entity and its operation;
• The role of each shareholder regarding these and decision-making;
• The execution of oversight responsibilities, obligations and rights of each shareholder with respect to the entity and its operation;
• Ppreferential acquisition rights;
• The right to Tag-Along and Drag-Along;
• Estate planning, limitations, guidelines and procedures to be followed in the event of the decease of any of the shareholders;
• Management and inspection of accounting, finances, records and reports;
• Treatment of profits and distribution of dividends;
• The ways and means of resolving judicial and extrajudicial conflicts.

In order to respond to the shareholders' desire for how they expect their entity to be managed in its entirety, it is an opportunity for them to build a Shareholders' Agreement based on their most realistic expectations and wills. This Agreement, in the best of scenarios, will serve as a guide for the operation, but in the worst of scenarios, will serve to remind each other and third parties of the terms to which they are bound and how they expect the entity to operate and be managed, being this Agreement enforceable through administrative and even judicial channels.

Authors:
Melania Dittel - Partner in Arias Costa Rica
Sebastián Solano - Associate in Arias Costa Rica

The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.