Ownership Agreement (ejeraftale)
- 2 minute read
- Legal and Corporate Law
When founding a company, there is an almost overwhelming list of administrative requirements and mandatory filing. This may make you want to skip the documents that are not required. But in the case of ownership agreements, it is actually a very good idea to formalize this into a legal document.
What is an ownership agreement (ejeraftale)?
The ownership agreement is a document dedicated to describing what terms and rights apply to the ownership of a company, and how the involved parties should cooperate.
Typically, it includes guidelines on how to handle disputes, how to proceed when an owner wants to sell their shares, and clauses that secure the company.
The ownership agreement only regulates the relations between the owners. It does not influence the Articles of Association or in other ways influence the company.
Do I need an ownership agreement?
The first thing that should be mentioned is that having an ownership agreement is voluntary and it does not need to be registered anywhere.
But unfortunately, it is not rare that founders end up in unpleasant situations that could have been somewhat avoided or at least mitigated had there been an ownership agreement. Yet, many deem it to be unnecessary when establishing a company.
But drafting the document is a good way to align your expectations, and by that proactively setting a framework for navigating potential conflicts. And should a dispute occur, having an ownership agreement can save this from becoming a costly and time-consuming process to solve.
Ownership agreements are often beneficial for companies that have or will at any point have more than one owner. And this is regardless of the company type.
What should the ownership agreement include?
What to include varies from business to business, as it depends on your company structure. But it is a good idea to go through all the points and discuss what to include – and what to omit.
Management and commitments:
It should be clear what each owner is expected to deliver besides capital, e.g. work commitments, roles, responsibilities, and management of daily operations.
Related to this, it is also a good idea to outline how decisions are to be made. Is every vote equal? Are there any veto rights? How big a majority is needed for things to be adopted? Is there a need for a deadlock clause, which can be relevant if two owners have the same amount of shares and/or rights and there is a conflict between the two?
Capital and contributions:
A very essential thing to include is how capital contributions is allocated and how much each individual owner has contributed. ‘Contributions’ here refer to both capital, tools, network, service deals, etc.
It is also important to define the following: what do we do when there is a need for capital increases? What can owners do with their shares, e.g. mortgaging? When and how do we have the company valuated?
Selling shares or selling the business:
First of all, it is important to outline when and how an owner or founder is able to sell.
Next up, you need to define what happens to an owner’s shares if they leave the company. Will owners have the right of first refusal? This means that owners have the first right to buy the shares. In that way, you would avoid having to bring in a new owner. It also means that the responsibilities of the now ex-owner would need to be handled by someone else among the owners.
Some include a co-sale option in the ownership agreement. This means that should a certain percentage of shares be sold to an external buyer the co-owners have the right to also sell their shares. Some even include co-sale obligations. Here, minority owners are required to also sell if the majority owners are selling their shares.
Dividends:
It is a good idea to have clear guidelines and policies regarding dividends to avoid conflicts about how and when this is done.
Clauses protecting the company:
Whereas much of what to include in the ownership agreement relates to how current owners avoid disputes, it is also important to future-proof the business regarding competition.
- Competition clause: This can prevent ex-owners from investing, consulting, or working with or for competitors for a given amount of time after leaving.
- Customer clause: This can prevent ex-owners from taking away customers and bringing them to a new company when leaving.
- Confidentiality clause: This can mean that information about key figures, processes, etc. is not passed on from the company.
At mighty admins, we can assist you with:
Legal documents, e.g. transfer of shares, capital increases, loan agreements, and waivers.
Corporate documents, e.g. Shareholders Register and AoA.
Incorporation of ApS, A/S, and branches, incl. VAT and employer registration.
… And much more
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