A shareholder agreement is one of the most critical legal documents in the life of any Nigerian company with multiple owners. While the Companies and Allied Matters Act (CAMA) 2020 provides general rules for company operations, a shareholder agreement ensures personalized clarity on how shareholders intend to work together, make decisions, and resolve disputes.
What is a Shareholder Agreement?
A shareholder agreement is a private contract among the shareholders of a company that defines their rights, duties, obligations, and protections. It governs key aspects of ownership, management, and control, often supplementing the company’s Articles of Association.
Unlike public corporate documents filed with the Corporate Affairs Commission (CAC), a shareholder agreement is typically confidential and enforceable only among the parties involved.
Why You Need a Shareholder Agreement in Nigeria
Many Nigerian businesses start informally, often between family members, friends, or former colleagues. Without a well-drafted shareholder agreement, personal trust can quickly deteriorate when money, management, or equity decisions come into play.
A good shareholder agreement:
- Prevents and resolves internal disputes
- Protects minority shareholders
- Regulates how shares can be sold or transferred
- Defines decision-making powers
- Provides exit strategies (for voluntary or involuntary departures)
Key Clauses to Include
Here are some essential elements every shareholder agreement should contain:
- Shareholding Structure: Clearly state who owns what percentage of shares.
- Decision-Making and Voting Rights: Outline how decisions are made—by majority, supermajority, or unanimous vote.
- Board Composition: Define how directors are appointed and removed.
- Dividend Policies: State how and when profits will be distributed.
- Dispute Resolution: Include arbitration or mediation clauses to avoid litigation.
- Exit Clauses: Define procedures for voluntary exit, death, disability, or forced sale.
- Drag-Along and Tag-Along Rights: Protect majority and minority shareholders during sale events.
- Confidentiality and Non-Compete: Protect the business against internal and external misuse of sensitive information.
Legal Tips
- Have the agreement drafted or vetted by a qualified corporate lawyer.
- Ensure the provisions comply with CAMA 2020 and other applicable Nigerian laws.
- Review the agreement periodically, especially after significant investment or operational changes.
