Shareholders Agreement: Valuation, Exit Clauses and Legal Framework France / Switzerland

Introduction: The Instrument That Defines the Rules of the Game Between Shareholders

The shareholders agreement is one of the most strategic documents a company can enter into — and one of the most underestimated. In family SMEs as in growth companies, it defines the rules of the game between shareholders well before tensions arise: who decides, under what conditions, at what price, and according to what valuation method.

When a sale, a fundraising round or a shareholder dispute occurs, it is the agreement that determines whether the transition happens smoothly or in conflict.

The shareholders agreement — known as a partnership agreement (pacte d'associés) when dealing with a SARL or Sàrl — is an extra-statutory contract entered into between all or some of the shareholders of a company. It complements the articles of association without replacing them, organising relations between shareholders on points that the articles do not cover: governance, share transfers, valuation mechanisms, exit clauses and minority protection. Unlike the articles of association, it is confidential and is not filed with the commercial register.

As Professor Alain Couret, a French specialist in company law, notes: "The shareholders agreement is the instrument by which shareholders anticipate the conflicts they do not wish to have." This formulation captures the very essence of the document: it does not resolve crises — it prevents them, by setting out in advance the rules that can no longer be calmly negotiated once a crisis has erupted.

The central question raised by any well-drafted shareholders agreement is that of valuation: at what price will shares be transferred in the event of a shareholder exit, a sale to a third party, the exercise of a drag-along clause or liquidation of the company? This question is all the more complex given that the legal framework differs fundamentally between France and Switzerland — in the mechanisms for fixing prices, in the enforceability of clauses, and in the taxation applicable to exits. A poorly drafted agreement can expose its signatories to deadlock situations or costly disputes at precisely the moment when they most need clarity.

This article presents Hectelion's complete methodology for the analysis and implementation of valuation clauses in a shareholders agreement, under French and Swiss law. We will examine in turn the origin and comparative legal framework France/Switzerland, the governance clauses, the valuation mechanisms and their numerical translation, the main exit clauses — right of first refusal, drag-along, tag-along, good leaver/bad leaver, anti-dilution, liquidation preference, MAC clause — the comparative exit taxation, and two quantified case studies illustrating these mechanisms in practice.

Origins and Evolution of the Shareholders Agreement

The shareholders agreement has its origins in Anglo-Saxon contractual practice, in the form of the shareholders' agreement. In France, it developed from the 1980s with the rise of venture capital. In Switzerland, the practice is similar but rooted in the Code of Obligations (CO), which offers greater contractual freedom. The intensification of merger and acquisition transactions, the rise of private equity funds and the development of startups have progressively established the shareholders agreement as a standard of good governance. Today, any institutional fundraising process involves the signing or revision of an agreement.

Would you like to have your business, its assets or financial instruments valued, sell it, or conduct a financial due diligence?

‍ Hectelion handles all these operations in France and Switzerland — business sale, divorce, shareholders agreement, taxation, assets, financial instruments and financial due diligence.

‍→ Book a call — 30 minutes, confidential

Definition and Legal Nature

The shareholders agreement is an extra-statutory contractual agreement between all or some of the shareholders of a company, the purpose of which is to organise their relations, define the governance rules and provide for the conditions under which shares may be transferred. It differs from the articles of association on three points: confidentiality (not filed with the commercial register), flexibility (greater contractual freedom), scope of parties (may bind only some shareholders).

Application Context: When and Why to Enter into an Agreement?

The shareholders agreement is recommended in four typical situations: at incorporation with multiple founders; during a fundraising round (any institutional investor requires an agreement as a condition of their investment — see our article on startup development stages); during a partial acquisition; and during a family transfer — in family SMEs, the agreement organises coexistence between shareholder family members.

Comparative Legal Framework: France and Switzerland

France: A Codified but Flexible Framework

In France, the agreement is a contract governed by common law (art. 1128 Civil Code). Article 1843-4 of the Civil Code is the central mechanism: where the articles or the agreement provide for the transfer of equity interests without their value being determinable, this value is fixed by an expert appointed either by the parties or by the president of the court. Exit clauses are valid provided they do not constitute leonine clauses (art. 1844-1 Civil Code).

Switzerland: Contractual Freedom and Flexibility of the CO

In Switzerland, the agreement is governed by the CO (arts. 680 et seq. for SAs, arts. 786 et seq. for Sàrls). The CO revision that entered into force on 1 January 2023 introduced three key changes: (1) plural voting rights authorised in SAs (art. 693 revised CO); (2) transfer restrictions that can be included in the articles with enforceability against third parties (art. 685b revised CO); (3) clarified forced exit mechanisms in Sàrls (art. 822a revised CO). In the event of disagreement on share value, the expert is freely appointed by the judge (art. 183 CPC).

Comparative Table France / Switzerland

Governance Clauses

Veto rights granted to a minority investor typically cover: any amendment to the articles, any issuance of new shares, any disposal of significant assets, any indebtedness beyond a defined threshold, and any change of control. An investor holding 20% of the capital may require a seat on the board. In Switzerland, since the 2023 CO revision, plural voting rights allow certain shareholders to be granted decision-making power exceeding their capital ownership share (art. 693 revised CO). Institutional investors require monthly or quarterly reporting (P&L, balance sheet, cash, KPIs), access to accounting books and audit rights.

Valuation Clauses

Valuation clauses are the technical heart of the agreement. Three approaches coexist. See our guide on business valuation methods.

Fixed Price or Floor Price: A fixed or floor price determined at signing provides maximum certainty but risks becoming inappropriate if the company's value evolves significantly.

Predefined Valuation Formula — the recommended approach: Equity Value = Normalised Average EBITDA (Y, Y-1, Y-2) × Sector Multiple − Restated NFD + Surplus Cash. Numerical illustration: Normalised average EBITDA = CHF 500k, multiple = 6×, NFD = CHF 300k, surplus cash = CHF 80k → Equity Value = (500 × 6) − 300 + 80 = CHF 2,780k. In Switzerland, SME agreements frequently include a reference to the practitioners' method (2024 CSI rate: 8.75%, Circular no. 28). See our article on business valuation: France / Switzerland differences.

Appointment of an Independent Expert: The third approach provides for an independent expert appointed by the parties or, failing agreement, by the president of the court (art. 1843-4 Civil Code in France / art. 183 CPC in Switzerland). Hectelion regularly intervenes in this context — see our business valuation service.

Exit Clauses

Right of First Refusal (ROFR): Grants the right to acquire on a priority basis the shares of a selling shareholder. In Switzerland, it can be included in the articles (enforceable against third parties) or in the agreement alone.

Drag-Along: Allows majority shareholders to force minority shareholders to sell upon a change of control. Its exercise mechanism must define: (1) the trigger threshold; (2) the minimum price per share; (3) the prior notification period (30 to 60 days); (4) conditions precedent. See our article on premiums and discounts in business valuation.

Tag-Along: Allows minority shareholders to join a majority shareholder's sale on the same terms.

Lock-Up Period: Prohibits founders from selling shares for a defined period (typically 12 to 36 months).

Good Leaver / Bad Leaver: A good leaver departs in legitimate circumstances: shares bought back at market value. A bad leaver departs in disloyal circumstances: shares bought back at nominal value or 50 to 70% of market value.

Ratchet: Capital allocation adjusted based on performance. If targets are exceeded, founders recover shares at the expense of investors.

Anti-Dilution: Protects investors against down rounds. Two mechanisms: full ratchet and weighted average (European market standard). See our article on startups in fundraising rounds.

Liquidation Preference: Guarantees the investor a minimum recovery of their investment before founders. Non-participating: investor chooses between recovering preference or converting. Participating / double dip: investor recovers preference AND participates pro rata. Illustration: Fund B invested €1.5m (30%), non-participating 1×. On sale at €4m: Fund B takes preference (€1.5m) — founders receive €2.5m. On sale at €8m: Fund B converts (30% × €8m = €2.4m) — founders receive €5.6m.

MAC Clause: Allows a party to suspend or abandon a transaction if a significantly adverse event occurs between signing and closing. Events typically excluded include general market changes; included are losses of significant clients, major legal proceedings. In Hectelion's practice, we recommend coupling the MAC clause with a price adjustment mechanism rather than a simple withdrawal right: commission a new independent valuation and negotiate an adjusted price.

Earn-Out in the Shareholders Agreement

The earn-out is a conditional price mechanism: part of the sale price is only paid if certain post-closing targets are met. Standard structure: a fixed tranche at closing (70 to 80% of price) and conditional tranches over 1 to 3 years. In agreements involving LBO or OBO financial structuring, earn-outs are frequently used. Rigorous financial due diligence is essential to validate the assumptions on which the earn-out rests.

Comparative Exit Taxation

France: Capital gains on share transfers by resident individuals are subject to the PFU at a global rate of 30% (12.8% income tax + 17.2% social levies) pursuant to Article 150-0 A of the CGI. Exemption regimes: art. 150-0 D ter (enhanced allowance for retiring SME managers); art. 238 quindecies (partial or total exemption on disposal of complete business activity branch). The share valuation at exit directly impacts the taxable capital gain.

Switzerland: Individuals holding shares as private assets benefit from the exemption of capital gains. This fundamental difference — France (PFU 30%) / Switzerland (exemption) — must be integrated into the negotiation of exit clauses in cross-border agreements. See our analysis of France / Switzerland differences in business transfers.

Examples and Case Studies

Case 1 — Founders / Investor Agreement in France (Tech SAS)

Company A SAS: 3 founders (70%), Fund B VC (30%, €1.5m investment at €5m post-money). Normalised EBITDA year N: €420k. Valuation: normalised average EBITDA 3 years × 8× − NFD. At €420k: indicative EV = €3,360k. Drag-along: triggered if offer > 12× EBITDA, 45-day notification. Anti-dilution: weighted average if new round at post-money < €5m. Good leaver / bad leaver: exit within 3 years → buyback at nominal value (bad leaver) or market value (good leaver). Liquidation preference: non-participating 1× (€1.5m). On sale at €4m: Fund B takes preference — founders receive €2.5m. On sale at €8m: Fund B converts — founders receive €5.6m.

Case 2 — Agreement Between Shareholders of a Swiss SME (Industrial Sàrl)

Company B Sàrl: Mr X (60%), Ms Y (40%). Revenue: CHF 2.2m. Normalised net profit: CHF 180k. ANAV: CHF 750k. Practitioners' method valuation: Yield Value = 180 / 8.75% = CHF 2,057k; Substantial Value = CHF 750k; Practitioners' Value = (1×750 + 2×2,057) / 3 = CHF 1,621k. Ms Y's share (40%) = CHF 648k. ROFR: pre-emption within 60 days at the formula price. Good leaver / bad leaver: bad leaver within 5 years → buyback at 70% of market value; good leaver → 100%. Taxation: shares held as private assets → capital gain exempt.

Advantages and Limitations

A well-drafted agreement prevents disputes, secures investments and protects minorities. Combined with rigorous financial due diligence and appropriate financial structuring, it forms the foundation of any well-prepared transaction. Limitations: enforceability sometimes difficult to implement; in Switzerland, extra-statutory clauses are not enforceable against third parties; a poorly drafted valuation clause can create more disputes than it prevents.

FAQ — Frequently Asked Questions on Shareholders Agreements

What is a shareholders agreement and is it mandatory?

No, it is not legally mandatory. But it is strongly recommended as soon as a company has two or more shareholders, or when an investor enters the capital.

How is the price calculated in an exit clause?

The price is determined either by a predefined formula (EBITDA multiple, practitioners' method in Switzerland) or by an independent expert appointed by the parties or the court (art. 1843-4 Civil Code in France / art. 183 CPC in Switzerland). See our guide on business valuation methods.

What is the difference between drag-along and tag-along?

The drag-along protects majority shareholders: it allows them to force minorities to sell in a change of control. The tag-along protects minority shareholders: it allows them to join a majority shareholder's sale on the same terms.

Is a Swiss shareholders agreement enforceable against a third-party buyer?

Only if the clauses are included in the articles of association. Extra-statutory clauses bind only the agreement's signatories — one of the most important drafting choices in Swiss law since the 2023 CO revision (art. 685b revised CO).

What is the tax difference between an exit in France and Switzerland?

In France, the capital gain on disposal is subject to PFU at 30% (art. 150-0 A CGI), subject to specific exemption regimes. In Switzerland, individuals holding shares as private assets are exempt from capital gains tax.

CEO Message

The shareholders agreement is one of the subjects on which Hectelion most frequently advises clients — not as a lawyer, but as a financial expert responsible for structuring the valuation clauses. What we observe in practice is consistent: agreements are often well drafted from a legal standpoint, but insufficiently precise on the financial mechanics. The valuation formula is too vague, the method for calculating normalised profit is not defined, net debt and working capital adjustments are not detailed. Our recommendation is simple: invest in the precision of the valuation clause at the drafting stage. An independent financial expert involved in the drafting process costs infinitely less than the dispute that results from a poorly drafted clause.

Aristide Ruot, Ph.D — Founder & Managing Director, Hectelion

Conclusion: Shareholders Agreement and Valuation

The shareholders agreement is the most powerful contractual instrument available to shareholders to organise their relations, protect their investments and prepare capital transitions. In France as in Switzerland, price-fixing mechanisms — predefined formula, practitioners' method, or appointed expert (art. 1843-4 Civil Code / art. 183 CPC) — must be drafted with rigour. Understanding valuation methods, discount rate parameters and applicable premiums and discounts is essential for drafting robust clauses. For transactions involving LBO, MBO or OBO structures, the financial structuring of the agreement is particularly important. At Hectelion, an independent advisory firm based in Mont-sur-Lausanne, active across France and Switzerland, we advise at the drafting stage and act as independent expert at the application stage.

Interested in Business Valuation Training?

Hectelion offers professional training in business valuation, combining theoretical frameworks, practical methodologies, and real-world case studies. 👉 Learn more about our valuation training programs

Author

Aristide Ruot, Ph.D

Founder | Managing Director