Need to regulate the relationship of company founders
Modern economic realities, especially in the innovative technology sector, promote the rapid establishment and development of start-up entities. The dynamics of development, the often high volatility of personnel and the lack of rigid organizational structures mean that one of the key factors determining the success of such an enterprise becomes the concerted cooperation of its founders. Although Polish company law legislation provides formal requirements for the formation and operation of companies, it does not address in detail the internal personal relationships between partners. In this space, the civilist construction of a shareholders' agreement, also called a founders agreement, which is a special unnamed contract, concluded on the basis of Article 353¹ of the Civil Code (Journal of Laws 1964 No. 16 item 93, hereinafter: the Civil Code), is applicable.
In legal and business practice, the custom has developed of concluding shareholders' agreements (contracts) even before or in parallel with the incorporation of the company, especially when the partners are individuals, not related by capital, and their contributions are of a non-financial nature - such as know-how, rights to technology, or personal involvement in the development of the venture. The purpose of this agreement is to precisely define the rights and obligations of the founders and to safeguard the interests of the company in the context of potential disputes or personnel changes.
Legal basis and legal nature of the shareholders' agreement
The shareholders' agreement is not regulated as a separate type of contract in the Civil Code, which means that it has the character of a so-called unnamed contract. Its legality is based on the principle of freedom of contract, expressed in Article 353¹ of the Civil Code, according to which the parties may arrange the legal relationship as they see fit, as long as its content or purpose are not contrary to the law, the nature of the relationship or the principles of social intercourse.
In the case law of the Supreme Court, it is accepted that the drafted shareholders' agreement is of an obligatory nature, i.e. it binds only the parties thereto and does not directly affect the content of the partnership agreement entered in the register. For example, in one of its judgments, the Supreme Court emphasized that "the shareholders' agreement of a limited liability company does not constitute an amendment to the articles of association within the meaning of the Commercial Companies Code," but is only an additional instrument for organizing contractual relations.
Thus, the effectiveness of the provisions of the shareholders' agreement depends on their compliance with mandatory provisions of the law, in particular the provisions of the Commercial Companies Code (Journal of Laws 2000 No. 94, item 1037, hereinafter: the Commercial Companies Code), as well as on the willingness of the parties to voluntarily comply with them. In the event of a violation of the shareholders' agreement, the sanction will be civil liability - including damages - and not invalidity of a corporate action, such as a resolution of a shareholders' meeting.
Scope of regulation - what provisions the shareholders' agreement should contain
The scope of the shareholders' agreement can be very broad and include all the essential elements of the joint venture that are not subject to statutory regulation. In doctrine and practice, the following areas of regulation are most often distinguished:
Distribution of shares and rules for their acquisition
One of the main elements of the shareholders' agreement is to regulate the distribution of shares in the company - both at the stage of its establishment and in later stages of development. It is worth including mechanisms to counteract so-called "free-riding" - i.e. a situation in which one of the partners ceases to be involved in the project, while retaining a significant equity stake.
A solution used is the institution of so-called vesting, which consists in gradually granting shareholders the right to take up shares as they achieve certain goals or after a certain period of time. Polish law does not prevent the introduction of such a mechanism in the form of a condition precedent, which is also confirmed by the practice of VC funds.
Safeguard clauses: confidentiality, non-competition and non-solicitation
In a start-up environment, where the company's main resource is knowledge, know-how and relationships, it becomes extremely important to include protective clauses in the shareholders' agreement to safeguard the interests of the company and the individual founders.
The most commonly used clause is the non-disclosure clause, which obliges shareholders not to disclose information relevant to their business, regardless of the form in which it was provided to them. Such provisions are in line with the provisions of Article 11(2) of the Act on Combating Unfair Competition of April 16, 1993 (i.e., Journal of Laws of 2022, item 1233), which defines business secrets. It is also advisable to define the scope of the concept of confidential information and to specify the duration of the confidentiality obligation - preferably subject to its validity also after the termination of cooperation.
Prohibition of competition ( non-compete clause) is another element of significant practical importance. In the jurisprudence of the Supreme Court, it is an established view that such a prohibition - in order to be effective - must be limited in time, subject matter and territory. The absence of such limitations may lead to the clause being declared invalid as contrary to the principle of freedom of economic activity (Article 20 of the Polish Constitution).
The non-solicitation clause, less well-known in the Polish legal system, is gaining popularity especially among investment funds. It is designed to prevent former shareholders from taking over a company's employees, clients or contractors. Such clauses, although not directly regulated in Polish legislation, can be effectively enforced as contractual obligations on the basis of Article 471 of the Civil Code, if the parties provide for the consequences of their violation, such as a contractual penalty (Article 483 of the Civil Code).
Dispute resolution mechanisms - court, arbitration or mediation?
Collaboration within a start-up, especially in situations of rapid growth or first setbacks, is sometimes a source of serious interpersonal and business disputes. It is therefore in the interest of all parties to introduce clear conflict resolution mechanisms into the shareholders' agreement.
The doctrine allows for the use of arbitration (Article 1157 et seq. of the Code of Civil Procedure) and mediation (Article 183¹ et seq. of the Code of Civil Procedure), which can significantly speed up the claims process and reduce court costs. It is also common practice in the venture capital community to use so-called impasse mechanisms, such as:
- "Russian roulette " - one partner offers to buy out the other' s shares for a certain price; the other party must either sell its shares or buy back the bidder's shares for the same amount.
- "texas shoot-out " - each side makes a sealed bid to repurchase; the higher bid wins and the bidder acquires the opponent's shares.
Although these mechanisms do not have explicit statutory authority, they are permissible in trade as an expression of the autonomy of the parties' will (Article 353¹ of the Civil Code), as long as they do not contradict the principles of social intercourse.
Shareholders' agreement vs. articles of association - relationship between the acts
According to the established line of jurisprudence, the provisions of the shareholders' agreement do not have corporate effects, and therefore cannot be enforced through the internal mechanisms of the company (e.g., resolutions of the shareholders' meeting) if they were not simultaneously entered into the body of the articles of association. In one of its rulings, the Supreme Court indicated that "the provisions contained in the shareholders' agreement do not have a normative character and cannot affect the effectiveness of the actions of the bodies of a limited liability company if they have not been entered into the articles of association."
A practical conclusion follows from the above: if shareholders want certain provisions to also have force against third parties (e.g., investors, new shareholders, registration courts), they should seek to have them inserted into the articles of association and registered with the KRS. An example is a clause on the right of first refusal to buy shares - if it is not in the articles of association, it will not be effective against buyers outside the shareholders.
Securing investments and relations with outside investors
Raising financing from outside investors, such as venture capital funds, business incubators or angel investors, entails adapting the shareholders' agreement to the new capital realities. These funds generally demand a separate investment agreement ( investment agreement), which includes key provisions on the distribution of shares, corporate rights, decision-making principles and exit clauses ( exit strategy).
In this context, it is extremely important to maintain consistency between the shareholders' agreement and the investment agreement. In doing so, it should be borne in mind that investors, as a rule, require that they be given so-called special rights, such as veto rights with respect to certain strategic decisions. Such rights, however, must be reflected in the articles of association and entered in the National Court Register, in accordance with Article 159 § 1 of the Commercial Companies Code, if they are to be effective against third parties.
The introduction of an investor into a company also often involves the restructuring of shares, the issuance of new shares or the conversion of receivables into shares (so-called convertible notes). The shareholders' agreement should then provide for share dilution rules, safeguards against down-round (issuance at a lower valuation) and preference clauses for the shares.
Practical mistakes when creating a shareholders' agreement and how to avoid them
One of the most common mistakes made by shareholders is to conclude a contract that is too general or overly technical, without tailoring it to the realities of a specific project. Many founders use templates available online, failing to recognize that each clause should reflect individual arrangements and long-term plans. The use of generic provisions can result in ambiguous provisions, unenforceability, or worse, conflict with applicable law.
Another major shortcoming is the omission of issues concerning the departure of one of the shareholders. The lack of adequate mechanisms for buyouts, vesting or determining the value of shares upon their disposal leads to serious conflicts and decision-making paralysis. In particular, it is necessary to guard against a situation in which a "dead shareholder" retains voting rights in the company without performing any real actions.
The need to verify the compatibility of the provisions of the shareholders' agreement with the content of the partnership agreement and other internal documents is also often forgotten. In practice, this means the risk of conflicting obligations and difficulties in enforcing certain clauses - especially in the absence of unanimity among shareholders.
From a practical point of view, it is recommended to periodically review and update the shareholders' agreement, especially in situations of structural changes, entry of new investors, foreign expansion or a change in the business model.
Data protection, business confidentiality and other legal obligations of shareholders
Shareholders of start-ups, as persons jointly responsible for the conduct of business, also bear certain obligations under public law - in particular, with regard to the protection of personal data and business secrets.
In accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016. (RODO), shareholders - if they have access to the personal data of customers, employees or contractors - can act as data controllers or processors. Accordingly, it is worth including provisions in the shareholders' agreement that obligate each party to comply with data protection regulations, use appropriate technical measures, and not provide access to data to unauthorized persons.
At the same time, under Article 11 of the Law on Combating Unfair Competition, shareholders should undertake to protect business secrets, understood as any technical, technological, organizational and other information of economic value that is not generally known and to which access has been appropriately restricted. The introduction of such provisions - along with contractual penalties - can, in practice, significantly increase the company's operational security, especially in external relations.
Negotiating a shareholders' agreement - recommendations for practitioners
Negotiating the content of a shareholders' agreement should be done thoughtfully, transparently and with a balance of interests of all parties. Giving too much preference to one party can lead to a weakening of trust, discouragement or even a break in cooperation.
At the negotiation stage, it is advisable to use the mediation of a lawyer or advisor who understands the specifics of the start-up market and can translate technical business arrangements into normative language. Each party should also have the opportunity for independent legal advice, which is particularly important in the context of the principle of freedom of contract and asymmetry of information.
A practical approach is to prepare a "term sheet" - a simplified negotiating document containing the main premises of cooperation, before proceeding to draft the actual shareholders' agreement. Such a document makes it possible to detect potential discrepancies in expectations earlier and assess the parties' willingness to compromise.
Summary: Shareholders' agreement as the foundation for the safe development of a start-up
A shareholders' agreement is a tool of fundamental importance for any company formed by several partners. Its proper drafting allows for precise regulation of relationships, prevents conflicts and strengthens trust - not only between partners, but also in the eyes of investors, customers and counterparties.
From the point of view of legal practice, it should be emphasized that each shareholders' agreement should be individually tailored to the nature of the specific venture. There is no one-size-fits-all template. It is also extremely important to secure compliance of the provisions of the agreement with the applicable regulations - not only the Commercial Companies Code, but also the laws on competition protection, personal data protection and tax regulations.
Finally, it's worth remembering that a good shareholders' agreement doesn't just solve legal problems - it also has a cultural and psychological function, fostering transparency, accountability and a healthy collaborative dynamic within the founding team.
If you have any questions on issues related to startups, please feel free to contact us by email at kontakt@kancelaria-pozniak.pl or by calling +48 665 246 969.