Why every startup needs a shareholders’ agreement (SHA)?
The startup ecosystem is often associated with ambitious ideas, bold decisions, and investor attention. Yet reality is often different. Many startups fail within the first years, and one of the main reasons is not market conditions or lack of funding, but internal disagreements among founders and shareholders.
Harvard Business School professor Noam Wasserman, in his book The Founder’s Dilemma, notes that around 65% of promising startups fail due to conflicts between founders. This is not just dry statistics – it signals that undefined relationships become a decisive factor. Young companies are highly vulnerable to disagreements because their operations lack a clearly established structure. Some founders may want to invest aggressively in growth, while others prefer to save and focus on profitability; some may feel they bear more responsibility, while others feel undervalued. If these issues are not discussed and formalized in advance, they create fertile ground for conflicts that quickly escalate into crises.
A shareholders’ agreement (SHA) should not be seen as a formality, but as an essential tool for ensuring company stability. It defines in advance how decisions are made, who is responsible for certain areas, how finances are managed, what rights and obligations shareholders/founders/investors have, and how disputes are resolved. Such an agreement not only reduces the risk of conflicts but also enhances the startup’s credibility in the eyes of investors. When evaluating young companies, investors look not only at the idea or technology but also at whether the relationships among shareholders are transparently structured.
That is why a shareholders’ agreement (SHA) is essential not only for startups but for any company with more than one shareholder. An SHA reduces the likelihood of disputes and provides a constructive mechanism for resolving them. Without it, both startups and established companies risk that a single disagreement over a decision can stall operations for months and deter investors as well as potential partners.
It is therefore vital for businesses to recognize risks arising from poor corporate governance, unclear division of responsibilities, or conflicts of interest, and to include clear contractual provisions on conflict management, decision-making processes, and exit scenarios. Defining what happens in case of disputes ensures a solid corporate governance structure. A well-prepared SHA not only minimizes the risk of conflicts but also provides a constructive mechanism for resolving them.
It is important to understand that an SHA is not just a formal document. It is a safeguard for business stability, ensuring that when disputes arise, the company can continue to move forward under pre-agreed rules. Get in touch with us, and we will assess which SHA provisions could best protect your business and your relationships with partners.
