What is a Membership Agreement?

Partners’ Agreement, also called a Shareholders’ Agreement or a Shareholders’ Agreement, is the document that allows establishing rules for the relationship between the partners of a company. It is legally provided for in the case of limited companies and, in the case of limited companies, it can be used as long as there are certain formalities, such as the mention of the document in the company’s articles of association.

Understanding the Membership Agreement

While the concept of a partner agreement is quite simple, one of the main doubts about the document is what kind of information it can bring. In that sense, it is a very versatile tool.

The agreement may present, for example, the rules for resolving preemptive rights of the partners. That is, if one of them wants to sell its stake in the company, it determines how the others will be affected. For this, the Tag Along or Drag Along clauses are inserted in the agreement .

The agreement may also provide forecasts on the company’s market value assessment method , on the calculation of pro labore and on the form of dividend distribution , financial matters of the utmost importance, which guarantee transparency.

This document may also present what the succession procedures will be in case of the death of one of the partners. For example, if a shareholder dies, the partners’ agreement establishes how their shares will be passed on to successors.

Membership Agreement Benefits

It is important to note that the membership agreement is not mandatory in nature. However, it brings important benefits in terms of corporate governance, in addition to helping the relationship between partners to be more professional and mature. A good example is the compulsory purchase clause, which can be used to resolve insurmountable conflicts between partners, compelling one of them to leave the company.

In addition, the agreement also brings more efficiency. It establishes, right at the beginning of the company’s existence, the criteria for solving complex issues that may arise in the future. So, when these issues emerge at some point, there is no need to spend time debating; just apply the rules provided for in the document. For example, you can include clauses determining how the company administrator will be chosen, a difficult decision, but one that becomes more efficient when there are already established criteria.

Another important benefit of adopting a partners’ agreement is to protect the interests of shareholders or quotaholders and the company itself, even in the face of future changes in management and in the corporate structure.

The document may include, for example, confidentiality duty clauses. This ensures that if any partner sells its stake and leaves the company, it will not bring relevant information to a potential competitor. Another example is the Lock Up clause, which aims to keep the founding partners connected to the company for a minimum time, usually from 3 to 5 years, since they have the greatest command of the business and their knowledge is essential to ensure the progress of the business. company in the initial period.

Drafting a Membership Agreement

Just as the document itself is quite flexible, there are also not many rules that must be observed in order for the membership agreement to be considered valid.

Like any agreement, it is a meeting of wills; that is, even if not all partners agree with the rules presented in the document, all of them must adhere to these rules voluntarily. No partner can be coerced into accepting the agreement, or it will be considered invalid and may be canceled.

It is interesting to note that, unlike the Articles of Association or the Bylaws, the partners’ agreement is not an instrument of public interest. Therefore, it does not need to be registered with the Commercial Registry or the Legal Entity Registry Office. Instead, it is only filed at the company’s headquarters.

 

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