On previous occasions, we have commented on the importance of signing a partners' agreement when setting up a company with more than one partner, in order to ensure the smooth running of the company and its continuity in the future.
One of the main covenants established in this type of agreement are the so-called tag along and drag along agreements, the purpose of which is to protect minority shareholders in one case and majority shareholders in the other, in the event of a possible sale or transfer of shares.
1. Tag along or right of accompaniment
The main purpose of this mechanism is to protecting minority shareholders by granting the right to dispose of its shareholding in the event that the majority shareholder decides to sell its shares to a third party.
In such cases, it is the obligation of the majority shareholder to inform the minority shareholders of the existence of a buyer, as well as the negotiation and purchase conditions, so that the minority shareholder has the option to dispose of its shareholding in the company under the same conditions as the majority shareholder.
This mechanism allows the minority shareholder to leave the company under the same conditions as the majority shareholder in the event of a possible change in the shareholding with the entry of a third party in the share capital.
2. Drag along
The drag along right is a right that is mechanism that favours the interests of the majority shareholder.
In this case, a majority shareholder who receives an offer to buy his shares may oblige the minority shareholder to sell its shareholding to the minority partner on the same terms as those offered to it, if the third party is interested in acquiring a higher percentage than that held by the majority shareholder or even the entire shareholding in the company.
3. Inclusion of the clauses in the Articles of Association
As we have already indicated in previous articles, shareholders' agreements are private agreements between the company's shareholders that cannot be enforced against the company, as long as they are not reflected in the Articles of Association, which means that their effectiveness and enforceability is reduced.
Therefore, as far as possible, the agreements of the shareholders' agreement should be reflected in the Articles of Association, although there will be some agreements which, due to their nature, cannot be regulated in the Articles of Association.
In the case of drag along and tag along clauses, their inclusion in the Articles of Association has been the subject of discussion for many years. yearsThe main issue is that of the right of carry-over.
The right to carry forwardAs indicated above, it is not a right as such, as in the case of the accompanying right, in which the minority shareholder has the power to decide whether or not to accept the takeover bid, but in this case, it is This is an obligation on the minority shareholder to sell his or her shares.This could go against the protection of their own rights.
As a result of the above, the registration of such clauses has been refused on numerous occasions, however, are beginning to be accepted for inclusion under the provisions of Article 188.3 of the Companies Register Regulationwhich states:
"Any clauses in the articles of association which impose an obligation on the shareholder to transfer his shares to the other shareholders or to specific third parties in circumstances clearly and precisely stated in the articles of association shall be registrable in the commercial register.
In this case, one of the main circumstances to be taken into consideration is the moment at which this type of right is included in the Articles of Association. The inclusion of the right of drag-along at the time of incorporation of the company does not entail any problem as the Articles of Association are expressly accepted at that time by all shareholders, both majority and minority. The same applies to the entry of new shareholders, whether through the purchase of shares, capital increase, etc., who fully accept the content of the Articles of Association in accordance with the wording in force at that time. However, it is a different matter when this is introduced at a later date by means of an amendment to the system for the transfer of shares provided for in the Articles of Association.
Amendments to the Articles of Association require the approval of the General Meeting of Shareholders, which must be approved by more than half of the votes corresponding to the shares into which the share capital is divided.
In view of the above, it could be understood that the introduction of this type of clause would be validated by the approval of the General Meeting with the vote in favour of more than 50% of the share capital. However, the doctrine considers that the inclusion of such clauses is not only a mere amendment of the company's Articles of Association, but the same affects the individual rights of the partners and therefore requires the individual consent of all of them.
In this sense, the Resolution of the Directorate General of the Registry and Notaries of 4 February 2017, which establishes that:
"In the present case, the "drag-out clauseThe "clausola di trascinamento" - close to the "clausola di trascinamento" as it is known in Italian law or the English term "drag-along" - whether it is considered to be a case of imposing obligations on partners referred to in Article 291 of the Capital Companies Act, as a statutory cause for exclusion of the shareholder (Article 351 of the same Act), The articles of association require the unanimous consent of the shareholders, and such unanimous consent cannot be replaced by attributing a right of withdrawal to the shareholder who has not voted in favour, as it is not a mere clause restricting the transfer of company shares. (cf. Article 346.2 of the Capital Companies Act). This does not mean that the consent of all shareholders must necessarily be expressed in the form of a resolution adopted unanimously at the general meeting at which all shareholders were present or represented. A majority resolution of the general meeting is sufficient, provided that all the other shareholders give their individual consent to such a resolution, either at the same meeting or at a later time (this is the result of Article 207.2 of the Companies Register Regulations, which requires for the registration of the introduction of a new ground for exclusion in the articles of association that "the consent of all the shareholders must be recorded in a public deed or expressly stated in the minutes of the relevant company resolution, which must be signed by the shareholders")".
The inclusion of such clauses in the Articles of Association is therefore possible, but if it is done after the company has been incorporated, the vote in favour of all shareholders is required.
