IBA Guide on Shareholders Agreements

Transcription

1 IBA Guide on Shareholders Agreements Montenegro Ivan Nonković Karanovic&Nikolic Law Office, Belgrade, Serbia 1. Are shareholders agreements frequent in Montenegro? No. Montenegrin laws generally speaking do not regulate shareholders agreements ( SA ). Therefore, shareholders in Montenegro usually regulate their mutual rights and obligations in relation to the company by company s by-laws, ie, Memorandum of Association ( MoA ) and Articles of Association ( AoA ). Nevertheless, shareholders are free to enter into an SA under which they would regulate certain issues regarding their rights and obligations in relation to the company. However, it should be noted that Montenegrin laws provide that certain issues have to be regulated by MoA and/or AoA. Therefore, such issues cannot be subject of an SA but MoA and/or AoA. 2. What formalities must shareholders agreements comply with in Montenegro? No formalities should be complied with. Namely, since SAs are not regulated by Montenegrin laws, general rules of Montenegrin laws regulating contracts should be applied. According to those rules, no form is required for the contracts. Of course, it is more than advisable that an SA is at least in written form, for the purposes of having evidence of the conclusion of such an agreement. 3. Can shareholders agreements be brought to bear against third parties such as purchasers of shares or successors? Generally, agreements under Montenegrin laws (and, therefore, SA) are binding only upon the contractual parties. Therefore, in case of share transfer, SA would not be binding upon a new shareholder, especially having in mind that an SA cannot be registered with a commercial registry or made public in any other such manner. When it comes to successors, in certain situations an SA can be binding upon them. Namely, agreements are binding upon universal successors but this is only if the agreement does not stipulate otherwise or it is obvious from the agreement that such a succession of the agreement was not intended by the parties. 4. Can a shareholders agreement regulate non-company contents? Page 1

2 Yes. Since Montenegrin laws do not regulate SAs, they do not stipulate what should be the content of SAs. SAs can also regulate non-company contents. 5. Are there limits on the term of shareholders agreements under the law of Montenegro? No. There are no limits on SAs term. 6. Are shareholders agreements related to actions by directors valid in Montenegro? No. Since SA in Montenegro is not deemed as a company s by-law, it cannot post any obligations to the directors in relation to the governance of the company. Such issues should be regulated by MoA, AoA or other company s by-law. 7. Does the law of Montenegro permit restrictions on transfer of shares? Yes. A share transfer can be restricted, as per Montenegrin laws. However, this relates only to the transfer of a private company s shares (which can be completely exempted from the trade), while transfer of a public company s share can be restricted only in exceptional circumstances. Nevertheless, the transfer of a private company s shares can be restricted only by AoA. Therefore, shareholders cannot use SA as a restriction instrument. 8. What mechanisms does the law of Montenegro permit for regulating share transfers? Montenegrin laws provide for the pre-emptive right of the private company and its shareholders when one of the shareholders intends to sell its share to the third person. Aside from this mechanism stipulated by the law, there are few others that can be stipulated by the shareholders to regulate share transfers (note that share transfers, as per Montenegrin laws, have to be determined by the AoA): (a) Tag along. This is a right of the shareholder in situations where another shareholder(s) is selling his or her share in the company to request to join the transaction and sell its share to the buyer, as well. (b) Drag along. This is a right that enables a shareholder selling its share in the company to force other shareholder(s) to join in the sale of a company. (c) Call option. This is the right of the shareholder to request from the other shareholder(s) to sell its share in the company to the requesting shareholder. (d) Put option. This is the right of the shareholder to request from the other shareholder(s) to buy from it its share in the company. Page 2

3 (e) Texas shotgun. This is a mechanism used to prevent deadlock situations. In case of deadlock (impossibility to adopt certain company decision which has to be adopted unanimously or with qualified majority due to the fact that one of the shareholders is refusing to adopt such decision), the shareholder who proposed adoption of the decision can state the price for the share to the other shareholder, and that other shareholder can choose: either to sell its share under stated price, or to buy the other shareholder s share under the stated price. Although those provisions could be inserted in an SA, as well, in the case of the breach of those provisions (prescribed by an SA) by one shareholder, the other shareholder could not request from the breaching shareholder to comply with the SA but could only claim damages from the breaching shareholder. 9. In Montenegro do by-laws tend to be tailor-drafted, or do they tend to use standard formats? Generally, in Montenegro by-laws tend to use standard formats. This is due to the fact that most of the corporate issues are regulated by Montenegrin laws. Consequentially, by-laws are generally repeating provisions of the laws. On the other hand, the provisions of the by-laws that are tailor made are provisions regulating corporate governance. 10. What are the motives in Montenegro for executing shareholders agreements? Having in mind that an SA is not regulated by Montenegrin laws and the fact that corporate governance and restrictions of transfer of share have to be determined by a company s MoA and AoA, there are not many reasons to execute SAs. Due to that fact, SAs are being concluded when shareholders, for example, wish to regulate their future investments in the company and their participation in such investments. 11. What contents tend to be included in shareholders agreements in Montenegro? As mentioned, SAs are generally not very frequent in Montenegro, therefore, it is hard to ascertain what tends to be included content wise. Nevertheless, when SAs are concluded, those can be focused on future investments in the company. For example, they constitute agreement between the shareholders to make future contributions into the company. However, since there is no mandatory content of the SA in Montenegro, shareholders can regulate by way of a SA any of their other rights and obligations in relation to the company (except those for which it is mandatory to be regulated by company s by-laws). 12. What determines the content included in shareholders agreements in Montenegro? Page 3

4 The downside of the MoA and AoA in Montenegro is the fact that those have to be made public. Therefore, shareholders sometimes enter into an SA in order to avoid their agreement becoming public. However, having in mind that Montenegrin laws explicitly provide that certain issues (such as corporate governance and share transfer restrictions) have to be regulated by the company s bylaws, one should be careful in order to avoid inserting certain provisions in the SA that ultimately could not be enforced. 13. What are the most common types of clauses in shareholders agreements in Montenegro? As mentioned, SAs are not so frequent in Montenegro; therefore, there are no common types of clauses. Nevertheless, SAs can regulate future investments in the company. They can also regulate certain issues in relation to the transfer of shares (tag along rights, drag along rights, etc). However, as mentioned above, the breach of such rights would only entitle the party suffering the breach to claim for damages. 14. What mechanisms does the law of Montenegro permit to ensure participation of minorities on the board of directors and its control? There are several mechanisms ensuring minorities participation on the board of directors and its control. Montenegrin laws provide for cumulative voting, qualified majorities in certain situations, etc. Furthermore, Montenegrin laws entitle shareholders with the right to request from the company redemption of their shares in the case of the adoption of certain decisions against which such shareholders have voted (such as decisions on mergers, reorganisations, diminishing of rights, etc). 15. Is it possible in Montenegro to ensure minority shareholder control by means of a shareholders agreement? Such provisions could be stipulated by the SA. However, the breach of such provisions by majority shareholder(s) would entitle minority shareholders only to claim damages while they could not enforce their control over the company (due to the fact that corporate governance is being regulated by the company s by-laws). 16. What are the usual valuation mechanisms in connection with rights of first refusal or share transfer regulations? The valuation mechanism that is generally being used is price offered by the third party, market value, value determined by the authorised expert or the price agreed in advance. 17. Is it admissible for a shareholders agreement clause to refer dispute resolution to the courts other than those of Montenegro and/or under a law other than that of Montenegro? Page 4

5 Yes. The condition is that there is a foreign element related to the SA (such as a non- Montenegrin shareholder or foreign contributor or similar). However, there are certain situations in which dispute resolution cannot be referred to foreign courts. For example, disputes in relation to foreign investments (in this case, dispute resolution can be referred to foreign arbitration under UNCITRAL rules, but not to a foreign court. Moreover, if the Government of Montenegro is a contractual party then only ICSID Arbitration is permissible). Furthermore, for certain issues, Montenegrin laws provide for the exclusive competence of the Montenegrin courts and the applicability of Montenegrin laws (eg, real estate). 18. Is it admissible for a shareholders agreement to include an arbitration clause with seat outside Montenegro and/or under a law other than that of Montenegro? As with the above, the SA can contain an arbitration clause with a seat outside Montenegro and/or under a law other than that of Montenegro but only if a foreign element is present in relation to the SA. Nevertheless, for certain issues, Montenegrin laws provide for exclusive competences of the Montenegrin courts and applicability of Montenegrin laws (eg, real estate). Page 5