Shareholders’ agreement in Andorra: what it is, why it matters and when it is essential

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🧭 The document that truly protects a company’s internal harmony

A shareholders’ agreement is a private contract between the partners of a company. It regulates their internal relations, their expectations, how decisions are taken and the mechanisms used to resolve disputes. Unlike the company’s articles — which are public, filed and mandatory — the agreement is flexible, confidential and capable of anticipating situations that legislation cannot always foresee.

In Andorra, where corporate law is robust but allows significant autonomy, a shareholders’ agreement is often the difference between a stable project and an inevitable conflict.

➤ To understand what each instrument regulates, you can also read Company bylaws in Andorra: mandatory content and best practices.

🏛️ What exactly is a shareholders’ agreement?

It is a private contract between the partners of an SA or SL which determines how they will relate to each other and how the company will be managed in both everyday and exceptional circumstances. Some of the matters it typically regulates include:

• how decisions are made
• what happens if a partner wishes to leave
• the conditions under which an investor may join
• how profits are distributed
• what happens if a partner breaches obligations
• how to avoid deadlock within governance bodies
• whether special rights or benefits are granted

The articles provide the minimum legal framework.
The shareholders’ agreement governs the company’s real day-to-day life.

If you want to understand Andorran company types, you can read SA or SL company in Andorra: key differences and how to choose the right structure.

🎯 What is its real purpose?

Its purpose is to regulate everything that the articles do not cover — and that, for various reasons, should not be made public. Unlike the articles, shareholders’ agreements are private contracts and are not accessible to third parties. Some of the most common issues addressed include:

🔹 Avoiding disputes between partners

The agreement anticipates common areas of tension and provides pre-agreed solutions before conflict arises.

It is strongly advisable to sign an agreement while relations are good, because once conflict appears — and in the absence of an agreement — resolving disputes in a manner acceptable to all becomes extremely difficult.

Most disputes relate to the conditions under which partners may separate.

🔹 Providing stability and legal certainty

It defines roles, obligations, responsibilities and the majority required for each type of decision.

In other words, certain decisions may be subject to special rules, such as reinforced majorities or agreed limitations.

🔹 Regulating the entry and exit of partners

The agreement prevents unwanted entrants and ensures that exits do not endanger the continuity of the project.

If no agreement exists, restrictions will be those contained in the articles or in the applicable corporate law.

🔹 Protecting investors and founders

It may include anti-dilution protections, preferential rights and specific obligations.

This becomes especially relevant in capital increases, where without an agreement, founders may be left unprotected.

🔹 Completing what cannot be stated in the articles

Many clauses cannot be public. A private agreement allows greater freedom and precision.

📌 When is it indispensable?

🔸 When there are two or more partners

In any company with more than one partner, a shareholders’ agreement is practically essential.
In companies with a sole shareholder (SAU or SLU), alignment is automatic, but otherwise disagreements frequently emerge over time.

🔸 When an investor enters (business angel, fund, financial partner)

No professional investor will join without a shareholders’ agreement — it is their legal safeguard.
The agreement can include preferential payment rights, vetoes over particular decisions, or predefined exit prices.

🔸 When partners have different roles or contributions

Shareholders do not always contribute capital alone. One may bring expertise or assets, another a client portfolio, another operational labour or know-how.
The agreement allows these shared realities to be reflected in a flexible and accurate way.

🔸 When controlling the transfer of shares is necessary

Especially in SL companies, where the entry of an unwanted third party may seriously disrupt internal equilibrium.

Even though SL share transfers are already more restricted than SA transfers, additional rules may be incorporated.

🔸 When avoiding deadlock is essential

The agreement can include effective anti-deadlock mechanisms.
For example, in a 50/50 company, the absence of an agreement can lead to complete paralysis, harming both parties.

🔸 When defining an orderly exit is important

How, when and at what price a stake may be sold.
This is often one of the most contentious issues when no prior agreement exists.

📜 Essential clauses of a well-crafted shareholders’ agreement

The following clauses are considered essential in Andorran legal practice and comparative law:

🟦 Roles, obligations and partner commitment

• minimum commitment, where applicable
• each party’s professional obligations
• non-compete obligations
• confidentiality
• additional contributions

🟪 Decision-making mechanisms

• decisions requiring a reinforced majority
• sensitive decisions capable of blocking the company
• tie-breaking mechanisms
• general limitations

🟧 Share transfer system

• pre-emption and withdrawal rights
• lock-up periods
• objective valuation of shares
• criteria for admitting new partners

🟨 Partner protection clauses

Particularly common in growing companies requiring significant investment. These clauses prevent deadlock or difficulties in a sale. They include:

• tag-along
• drag-along
• anti-dilution protections
• minority shareholder protection

🟩 Entry of investors

• round conditions
• economic and political rights
• periodic reporting
• vetoes over material transactions

🟫 Exit of partners and dispute resolution mechanisms

• buy-sell
• russian roulette
• texas shoot-out
• voluntary withdrawal
• expulsion for serious cause
• compulsory purchase at an agreed price

🟧 Dispute resolution

• mediation
• arbitration
• competent jurisdiction

⚖️ Shareholders’ agreement vs articles: key differences

In summary:

The articles:

• are public
• are filed
• bind current and future shareholders
• set the minimum formal legal regime

The shareholders’ agreement:

• is private
• binds only the signatories
• regulates internal relations
• allows clauses that cannot appear in public documents
• complements the statutory regime

Golden rule:
Matters affecting internal coexistence → shareholders’ agreement.
Matters affecting essential rights vis-à-vis third parties → the articles.

➤ To explore statutory matters in detail, you may also read Company bylaws in Andorra: mandatory content and best practices.

🧠 Unwanted consequences in the absence of a shareholders’ agreement

Without a private agreement, many situations arise that are rarely foreseen at the outset:

• total deadlock of the board or general meeting
• entry of unwanted third parties
• partners wishing to leave while demanding disproportionate prices, or the company or remaining partners being unable to buy their shares
• serious disputes between operational and non-operational partners
• inability to force a sale of the company
• long and costly litigation
• loss of internal stability
• in extreme cases, total collapse of the business

🧩 Conclusions

A shareholders’ agreement is an essential tool to ensure harmony, legal certainty and long-term continuity within a business project. In Andorra, where the articles provide flexibility but do not regulate every situation, the agreement adds order, protection and predictability.

It is indispensable to:

• protect founders and investors
• define roles and obligations
• manage entries and exits
• avoid disputes capable of destroying the company
• facilitate decision-making
• build a stable and investable project

📞 Had you ever considered it? You almost certainly need one

We frequently encounter business situations with no simple or satisfactory solution for the parties involved.

If you wish to avoid such scenarios, do not hesitate to contact us. We can help protect your assets, your project, or your family’s interests.

Whether you are considering launching a new business venture, incorporating a new company (you can see all the steps in the article Incorporating a company in Andorra: steps, requirements and advantages) or ensuring the continuity of your current project, we are at your disposal.

If you would like to know how we can assist you, you may contact us through our form.

Or book a personalised meeting just below this article.

We believe in long-term partnerships — and we want your project to have the guarantees to endure over time.

Last updated: November 2025