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

Shareholders agreement | Exit clauses & share valuation

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.

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), and 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: a founders' agreement is essential as soon as a company is created by two or more shareholders. The absence of an agreement is one of the main causes of co-founder conflicts.

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: in the context of a partial acquisition or strategic partnership, the agreement governs coexistence between the acquirer and existing shareholders.

During a family transfer: in family SMEs, the agreement organises coexistence between shareholder family members. Business transfers in this context are particularly complex without an agreement.

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 (expedited proceedings on the merits, with no right of appeal against the appointment). 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 key distinction: clauses included in the articles of association are enforceable against third parties; clauses in an extra-statutory agreement bind only the signatories. 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

Table — Comparative overview of the legal framework applicable to shareholders agreements in France and Switzerland. Enforceability and taxation of exits are the two most structuring points in cross-border agreements. Hectelion Observation (2025).

Governance Clauses

Voting Rights and Veto Rights

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. They must be calibrated so as not to paralyse day-to-day management.

Board Representation

An investor holding 20% of the capital may require a seat on the board of directors. 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).

Information and Reporting Obligations

Institutional investors require monthly or quarterly reporting (P&L, balance sheet, cash, KPIs), access to accounting books and audit rights. These obligations are the natural counterpart of the trust placed in the management team.

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

This is the recommended approach. The standard formula: 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.

The agreement must explicitly specify the method for calculating normalised EBITDA, the source of the multiple and the definition of NFD. The discount rate must also be defined if the formula includes a DCF.

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. We recommend combining a predefined formula with an expert clause in the event of disagreement on its application.

Exit Clauses

Right of First Refusal (ROFR)

The ROFR grants the right to acquire on a priority basis the shares of a selling shareholder, on the same terms as a third party. In Switzerland, it can be included in the articles (enforceable against third parties) or in the agreement alone (binding only on signatories).

Drag-Along

The drag-along allows majority shareholders to force minority shareholders to sell their shares upon a change of control, on the same terms. Its exercise mechanism must be precisely defined on four points: (1) the trigger threshold (offer for >50% or 66% of capital); (2) the minimum price per share guaranteed to minorities; (3) the prior notification period (30 to 60 days); (4) the conditions precedent (regulatory approvals, absence of MAC). See our article on premiums and discounts in business valuation to understand the impact on exit price.

Tag-Along

The tag-along allows minority shareholders to join a majority shareholder's sale on the same terms. It protects against the risk of ending up as shareholders alongside an unknown new shareholder.

Right of First Offer (ROFO)

Variant of the ROFR: the selling shareholder first offers their shares to other shareholders at a price they set. Faster and less expensive than the ROFR, but less protective for existing shareholders.

Lock-Up Period

The lock-up clause prohibits founders from selling their shares for a defined period (typically 12 to 36 months after an investor's entry). It may be total (no sales) or partial (sales limited to an annual percentage).

Good Leaver / Bad Leaver

A near-universal clause in agreements involving founder or manager shareholders. It distinguishes two types of departure with differentiated buyout terms.

A good leaver departs in legitimate circumstances (death, disability, retirement, dismissal without genuine and serious cause): their shares are bought back at their market value calculated by the agreement formula.

A bad leaver departs in disloyal circumstances (resignation during lock-up, dismissal for gross misconduct, breach of non-compete): their shares are bought back at a reduced price — nominal value or 50 to 70% of market value. This discount constitutes an economic sanction incentivising founders to remain committed. In France, validated by the Court of Cassation provided it does not constitute a leonine clause (art. 1844-1 Civil Code). Same logic in Switzerland under the CO.

Ratchet

The capital allocation is adjusted based on performance. If the company exceeds its targets, founders recover shares at the expense of investors. Conversely, if targets are not met, investors recover an additional ownership share.

Anti-Dilution

Protects investors against down rounds. Two mechanisms: full ratchet (conversion price adjusted to the new lower price — highly dilutive for founders) and weighted average (European market standard, mitigates the dilutive effect by accounting for the number of shares issued). Its implementation requires precise share valuation at each stage. For more on valuing startups in fundraising rounds, see our dedicated article.

Liquidation Preference

Determines the order of distribution of sale proceeds. It guarantees the investor a minimum recovery of their investment before the founders.

Two structures: non-participating (investor chooses between recovering their preference or converting into ordinary shares — whichever is more favourable) and participating / double dip (investor recovers their preference AND participates in the remainder pro rata — highly favourable to the investor).

Illustration: Fund B invested €1.5m (30% of capital), non-participating 1× preference.

On a sale at €4m: Fund B chooses the preference (€1.5m) as it exceeds 30% × €4m = €1.2m — founders receive €2.5m. On a sale at €8m: Fund B converts into ordinary shares (30% × €8m = €2.4m > €1.5m preference) — founders receive €5.6m.

The impact on the effective valuation of ordinary shares is direct and measurable.

MAC Clause (Material Adverse Change)

The MAC clause — or MAE (Material Adverse Effect) — is a protection clause that allows a party to suspend or abandon a transaction if a significantly adverse event occurs between signing and actual completion. It is particularly common in sale agreements and investment agreements involving a deferred closing.

The definition of MAC is the most delicate negotiated element of the agreement: too broad, it weakens the transaction by giving the acquirer or investor a near-automatic exit right; too narrow, it provides no protection against genuinely destabilising events. Events typically excluded from the MAC scope include general market changes, sector legislation changes and macroeconomic crises; included are losses of significant clients, major legal proceedings, industrial accidents or loss of a key regulatory licence.

In France, the MAC clause is interpreted strictly. In Switzerland, the principle of good faith (art. 2 CC) and the doctrine of rebus sic stantibus play a similar role.

In Hectelion's practice, we recommend coupling the MAC clause with a price adjustment mechanism rather than a simple withdrawal right: in the event of a MAC-qualifying event, the parties commission a new independent valuation and negotiate an adjusted price rather than abandoning the transaction.

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 (EBITDA, revenue, client retention). Its 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 to align seller and acquirer interests on post-closing performance. Rigorous financial due diligence is essential to validate the assumptions on which the earn-out rests.

Comparative Exit Taxation

France: PFU and Exemption Regimes

In 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: Article 150-0 D ter of the CGI provides an enhanced allowance for SME managers retiring (European SME criteria, holding ≥ 1 year, functions held ≥ 5 years); Article 238 quindecies of the CGI provides partial or total exemption on the disposal of a complete business activity branch. The share valuation at the time of exit directly impacts the taxable capital gain.

Switzerland: Exemption of Private Capital Gains

In 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. For assets held as commercial assets, the gain is taxable at ICC/IFD. See our analysis of France / Switzerland differences in business transfers.

Examples and Case Studies

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

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. Expert appointed in case of disagreement (art. 1843-4 Civil Code).

Drag-along: triggered if offer > 12× EBITDA, 45-day notification, prior ROFR at same price.

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 chooses preference (€1.5m) as it exceeds 30% × €4m = €1.2m — founders receive €2.5m. On sale at €8m: Fund B converts (30% × €8m = €2.4m > €1.5m preference) — founders receive €5.6m.

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

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. Expert appointed by the judge (art. 183 CPC) in case of disagreement.

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. Representation and warranty clause in the event of cantonal tax recharacterisation.

Advantages and Limitations

The Benefits of the Shareholders Agreement

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 and Risks to Know

Its enforceability is sometimes difficult to implement. In Switzerland, extra-statutory clauses are not enforceable against third parties.

A poorly drafted agreement on valuation clauses can create more disputes than it prevents. The precision of applicable premiums and discounts is particularly critical.

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. Its absence is one of the main causes of shareholder disputes.

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). The precision of this formula is the central financial issue of any agreement. See our complete 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. Both clauses are complementary and generally feature in the same agreement.

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. This is the fundamental difference with a statutory agreement — and 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 (art. 150-0 D ter CGI). In Switzerland, individuals holding shares as private assets are exempt from capital gains tax. This 30-point difference can represent several hundred thousand euros on a significant disposal. See our analysis of France / Switzerland differences in business transfers.

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.

And when the time comes to exercise the clause, the parties find themselves in disagreement on issues that could have been settled at a calm moment, before interests diverged.

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. Its real value is measured at the moment when circumstances put it to the test — a fundraising round, a sale, a strategic disagreement.

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. Contact us for an initial analysis of your situation.