Shareholders’ agreements in Hong Kong

Shareholders’ agreements are agreements made between members of a company which are specific to the fact that they are shareholders. The company is often a party to the shareholders’ agreement to ensure compliance and information. A commercial agreement between the company and one of its shareholders may be referred to in a shareholders’ agreement but should not be included.

Depending on the way the capital is apportioned between members, the following subjects are likely to be dealt with in the shareholders’ agreements:

  • corporate governance;
  • members information;
  • transfers of shares;
  • exits;
  • deadlock situations.

The shareholders’ agreement does not replace a company’s articles of association: it contains additional rights and undertakings from the shareholders towards each other.

It is good practice to amend a company’s articles of association to reflect the provisions of the shareholders’ agreement on corporate governance (even though limitations of powers cannot be opposed to bona fide third parties according to the indoor management rule of Turquand’s case (1856)). It is less frequent to have the provisions of the shareholders’ agreement regarding transfer of shares reflected in the articles of association: members usually prefer such to remain confidential. As a bare minimum, it is necessary to have a prevailing clause in the shareholders’ agreement stating that in case of contradiction with the articles of association, the provisions of the shareholders’ agreement shall prevail.

In our practice, shareholders’ agreements have layers of sophistication which add up with each additional member of a company or category of members.

When there is only one category of members consisting of 2 or 3 individual members having equal shares and working full time in the new venture, we call it a simplified shareholders agreement. Parties interests are aligned: grow the business, generate income, have procedures in place in case the members fall out and give a chance to the company to survive.

Working with a partner that has complementary talent and skills may contribute to the success of a venture. But nothing in life is guaranteed. The business environment will change. People change. A few years from now partners may have disagreements over how the business should be run or one of them may want to leave the company. If the shareholders don’t have a process agreed in advance on how to deal with these serious issues, and others, each of them may end up with nothing.

With this in mind it is important to have a written agreement drawn up by a lawyer that covers areas including compensation, exit clauses, and roles and responsibilities.”

(quote from the presentation letter of our simplified shareholders agreement package)

We have also created a framework for drafting a shareholders’ agreement for seed and series-A fund raising, i.e. with 2 categories of members being founders and investors. Although the final drafting will depend on the negotiations between investors and founders, Hong Kong startups market tend to a certain standard which is reflected in our framework.

Each investment round will see the addition of a new category of members, having invested at different conditions and having different expectations from the previous ones, making the shareholders agreement more and more complex, potentially with categories of shares having different voting or economic rights (for payment of dividends, in case of exit or winding up).

Shareholders’ agreements are typically entered into and reviewed at turning points of a company’s life, such as:

  • shortly after commencement of business;
  • when a new member joins, whether by acquiring shares from another member or applying for new shares issued by the company;
  • when investors come aboard to invest in the company;
  • when the company is party to a merger or acquisition transaction with all or part of the consideration paid in shares.


Our approach is comprehensive (looks at the big picture as well as all components of it), responsive and action focused.


During our first working meeting or call, we’ll ask you to explain the background and what you see as the objective of the shareholders’ agreement. Important information includes the profile of the various members and the reason for their investment, business of the company and how it is funded (fund raising, shareholders loans, factoring etc.).

An exhaustive and reliable capitalization table, on a fully diluted basis (including all options which may have been granted to suppliers, employees or else) has to be provided or we can provide assistance with such.

In turn, we will explain and discuss with you the usual clauses and their many variations (for bespoke shareholders’ agreement) or what is our suggested option for your company’s situation.


For simplified shareholders’ agreements, our usual turnaround time for the first draft is 5 working days from the first working meeting or when all information requested has been provided. It is likely a shareholder’s agreement with different categories of members and intense negotiations on the rights and obligations of each will take a few more days to prepare.


We keep our questions and comments focused on the purpose of drafting a relevant document that will provide for a structured approach to the life – and crisis – of the company, until the next turning point / shareholders agreement.


Pricing will depend on the level of complexity of the situation (categories of members), whether negotiations are taking place, and the purpose of the shareholders agreement. We have a fixed fee package for simplified shareholders agreement including 2 hours debriefing before drafting and 2 hours debriefing after as well as reasonable amendments of the draft. For other scenarios, we will usually structure fees as a fixed fee for the initial draft and debriefing with client and hourly rate for negotiations with the other members and their lawyers.