An Analysis of Shareholder Agreements

42 Pages Posted: 30 Aug 2002

See all articles by Gilles Chemla

Gilles Chemla

Imperial College Business School; CNRS ; Centre for Economic Policy Research (CEPR)

Alexander Ljungqvist

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

Michel A. Habib

University of Zurich; Swiss Finance Institute

Multiple version iconThere are 4 versions of this paper

Date Written: July 2002

Abstract

Shareholder agreements govern the relations among shareholders in privately-held companies, such as joint ventures or venture capital-backed firms. We provide an explanation for the use of put and call options, pre-emption rights, drag-along rights, demand rights, tag-along rights, and catch-up clauses in shareholder agreements. We view these clauses as serving to preserve the parties' incentives to make ex ante investments when ex post renegotiation may alter the parties' shares of the payoff. We extend our framework to discuss the use of other clauses, such as the option to extend the life of a business alliance.

Keywords: Shareholder agreements, put options, call options, pre-emption rights, drag-along rights, demand rights, tag-along rights, catch-up clauses

JEL Classification: G34

Suggested Citation

Chemla, Gilles and Ljungqvist, Alexander and Habib, Michel A., An Analysis of Shareholder Agreements (July 2002). CEPR Discussion Paper No. 3457, Available at SSRN: https://ssrn.com/abstract=325720

Gilles Chemla (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
London SW7 2AZ, SW7 2AZ
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CNRS ( email )

Dauphine Recherches en Management
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Alexander Ljungqvist

Stockholm School of Economics ( email )

111 60 Stockholm
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
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Belgium

Research Institute of Industrial Economics (IFN) ( email )

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Stockholm, SE-102 15
Sweden

Michel A. Habib

University of Zurich ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland
41-44-634-2507 (Phone)
41-44-634-4903 (Fax)

HOME PAGE: http://www.isb.uzh.ch/institut/profs/mhabib.htm

Swiss Finance Institute ( email )

c/o University of Geneva
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CH-1211 Geneva 4
Switzerland

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