Finland: A Shareholders Agreement For A Tech Startup – Part I

Last Updated: 13 June 2017
Article by Nordic Law

As a startup-orientated law firm, we at Nordic Law have had several early-stage startup clients with the recurring, oldie but goldie, question – do we really need to have a shareholders agreement (SHA) as we are all good friends and we all go way back? Down the line, without exception, we always advise our startup clients that they never should start a business without an SHA, let alone grow a business without it. With a well-functioning SHA, the founders and shareholders of a startup are able to solve, even possibly severe, problems beforehand and at its best an SHA minimizes the pressure of the shareholders enabling the shareholders to focus only on developing the business operations knowing that the core rules of the startup are clear, comprehensive and predictable. In other words, the yellow brick road to success is most often paved with a well-written SHA.

The next question we also often stumble upon is why an SHA is so vital? An SHA can along with the startup's articles of association be classified as the constitution of the startup. An SHA should in minimum govern how significant decisions in a startup are done, how the shareholder structure and the roles of each shareholder are defined, how a startup can be closed or sold in a liquidation event and how intellectual property rights essential to the startup's business operations should be protected. Especially in the light of the fast-paced business environment of early- and growth-stage startups, an SHA should be considered a must-have.

In this first blog post, which was originally published as a guest blog post on ArcticStartup's webpage, we will present certain key issues that should always be taken into consideration when drafting an SHA for a startup with working shareholders. The main focus will be on three separate topics:

  1. The roles of the shareholders and decision-making;
  2. Leaver situations and transfer of shares; and
  3. Redemption of shares from working shareholders.

The Roles of the Shareholders and Decision-making

In startups with many founders, one of the key aspects is that every shareholder is aware of his or her role in the startup. For majority shareholders it is also essential that their status is reflected in the administering of the startup. A good SHA should therefore always in a clear and understandable manner define the roles and specific tasks of the shareholders so that each shareholder is at all times aware of what is expected of them. This can, for example, be achieved with the help of the classification of shareholders to founders, working shareholders and investors. Especially if certain shareholders are responsible for managing and running the daily business operations, it is essential to define the roles of the shareholders that are not that active with the daily operations in order to avoid the `oh-so´ traditional "free rider" problem among startups.

If and when the roles of the shareholders have been defined, the next question that arises is the decision-making process of the startup. In most startups we have assisted, one or two of the founders have been the majority shareholders, whereby – prior to outside investors entering the picture – it is important to ensure that the majority shareholders are in every situation able to make all the decisions that are necessary in order to further-develop the startup. In this aspect, the SHA should always be prepared carefully as it is important that the SHA enables the majority shareholders to keep control of the significant decision-making, meaning, for example the right to nominate additional members to the board. It is also common that the SHA contains lists of certain key decisions, which require a qualified majority (explicitly defined, normally as 2/3 of all votes) and/or written consent from the majority shareholders.

Another recurring question is the role of the startup itself – should it be an actual party to the SHA or not? The opinion varies quite a lot, but in our view the startup itself should also be a part of the SHA as quite a few conditions of the SHA affect also the startup itself, whereby the startup is not per se bound to the SHA if the startup is not also an actual party to it. Another solution is that the startup is not an actual party to the SHA, but instead the startup commits in writing to abide by the conditions of the SHA that affect it. However, if you are the founder of a Finnish startup, you should always keep in mind that even though the startup would be a party to the SHA, the startup cannot abide by the SHA if it would mean that the startup would not comply with the Finnish Limited Liability Companies Act. That is also a factor that should always be kept in mind to ensure the best outcome with the SHA.

Leaver Situations and Transfer of Shares

As in everyday life, at some point also startups experience certain hiccups, which sometimes end in shareholders leaving the startup. It is, therefore, important that the SHA contains the necessary rules that control possible leaver situations – for example, what would happen if one of the co-founders suddenly decided to leave?

As a starting point, the shareholders could take advantage of the classic "bad leaver v. good leaver" concepts. If a shareholder leaves due to inappropriate behaviour, which would entitle the startup to terminate said shareholder's employment agreement, then said shareholder would be classified as a 'bad leaver'. In a 'bad leaver' situation the startup and/or the other shareholders normally have the right to redeem the shares of the leaver for a heavily discounted price (such as the original subscription price). Then again, if a shareholder is leaving based on the mutual decision of the shareholders or the shareholder is leaving due to circumstances that have been beyond the parties' control, then the leaving shareholder is most often classified as a 'good leaver'. It pays out to be a 'good leaver' as the shares of the leaver are most often redeemed for a considerably higher price compared to the 'bad leaver' situation. In 'good leaver' situation the redeeming of the shares could, for example, be based on the market value of the shares.

However, there are also other share transfer situations besides the above mentioned good or bad leaver situations. In the SHA should thus in an explicit manner be defined what the correct conduct is when transferring shares of the startup. Common conditions regarding the transfer of shares are that shareholders may not transfer shares without the consent of the other shareholders and that other shareholders shall always have the right of first refusal meaning that the remaining shareholders shall always have the right to purchase the shares of the selling shareholder. The right of first refusal and the correct conduct should in detail be defined in the SHA in order to avoid confusion among the selling shareholder, the remaining shareholders and the third party purchaser.

To the transfer of shares is closely connected the complete exit of the shareholders. In the SHA should be defined how the complete business of the company may someday be sold. In that instance, the common clauses concern drag-along and tag-along rights. The drag-along right becomes applicable when and if the majority shareholders wish to sell their shares and they receive a serious offer. If the majority of the shareholders want to sell, the rest of the shareholders have to join and cannot object to it. The tag-along right, however, is in place to protect the minority shareholders, including often investors, and it is useful when the majority of the shareholders have decided to sell their shares. If for example, a certain minority investor has originally invested in the startup because of the original founders, the tag-along right allows the investor to sell his or her shares at the same time as the original founders are selling.

Redemption of Shares from Working Shareholders

As mentioned above, in a well-functioning SHA the roles of all shareholders should in a clear manner be defined, whereby certain key employees, who often also are minority shareholders, would normally be defined as working shareholders.

The startup and/or the other shareholders should always have a right to redeem the shares of a working shareholder when the service or employment agreement of the working shareholder has been terminated – exemplified, the employment agreement of coder, and working shareholder, Adam is terminated and thanks to a well-written SHA, the startup has got the right to redeem Adam's shares.

However, an unconditional rule that would always require the leaving working shareholder to give up all of his or her shares could in some situations be argued as unreasonable, whereby we come to the mysterious world of vesting clauses. Simplified, with vesting is meant that each shareholder gets his or her full package of shares at once, but the startup and/or the other shareholders have the right to purchase a percentage of the shareholder's equity in case he or she walks away before all shares have vested – in other words, been earned. In a nutshell, vesting clauses protect especially the startup as all shareholders can rest assured that everybody in the team is working towards a common goal – the building of a successful and thriving startup.

The right of redemption normally lapse upon the working shareholder's shares becoming vested within the time frame set in the SHA. Standard vesting clauses typically last four years and have a one year 'cliff' meaning that if a shareholder bound to the vesting clause would leave the startup before the first year is complete, said shareholder would be obliged to sell all shares to the startup and/or the other shareholders.
However, after four years the shareholder would be able to keep all of his or her shares even though the shareholder would leave the startup.

Final Thoughts

Above has been presented certain key topics regarding a startup's SHA that hopefully have given a bit clearer view of the dos and don'ts. One thing that should always be kept in mind is that a well-written SHA takes away a lot of unneeded stress from the shareholders, which has got a direct positive impact on the startup itself. As the modified saying goes – happy shareholder, happy life.

Finally, as you may have guessed, there are other additional topics that are also very important to notice regarding an SHA, such as the protection of intellectual property rights and conditions relating to confidentiality, non-competition and non-solicitation, which can all be characterised as essential. This and much more will therefore be the topic in the next part of this blog series, so stay tuned for more!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.