Stage 2 · Build a credible file · Lesson 2 of 4
Your articles and your shareholders' agreement: what an analyst looks for
The articles are public and bind everyone; the shareholders’ agreement is private and binds only those who signed it. You will read both for the same company, then work out who can decide without whom.
The articles, one by one
Ordinary articles of association, opened one article at a time
These are the articles of a Malagasy SARL, filed in 2019. They are often the first document an analyst opens, because they can get hold of them without asking you. Open the articles one by one. Two of them decide what is possible.
Click an article to open it.
Article 6 · Share capitalMGA 20,000,000, divided into 2,000 shares of MGA 10,000
What the partners put in, and how many shares it is split into. The analyst compares this figure with your file and with the amount you are asking for.
Capital of 20 million ariary against a request for 3 million euros does not stop a file. The question will still come: have ready what the partners have lent the company and the profit left in it.
Article 7 · ShareholdingFounding partner: 1,480 shares (74%) · Partner B: 520 shares (26%)
Who held what on the day the articles were drafted. It is the starting point of your cap table, not necessarily where it stands today.
In 2023 the founder sold 280 shares to a fund, and nobody amended this article. The articles say 74%; the reality is 60%. An analyst who compares the two documents stops there.
Article 11 · Transfer of sharesFree between partners. To a third party: approval by partners holding at least three quarters of the shares.
The transfer approval clause. It says who may come into the capital, and with whose consent. An investor reads it to know whether they can get in, and then how they can sell later.
At three quarters, partner B, with 26%, can refuse any new partner on their own. The founder and the fund together hold only 74%: they are one point short.
Article 12 · Collective decisionsOrdinary decisions: more than half of the shares. Amending the articles: at least three quarters of the shares.
The voting thresholds. The articles set them, within the limits the law allows. You will use them further on to work out who decides with whom.
Article 13 · ManagementOne or more managers appointed by the partners. The manager holds the widest powers.
Who binds the company, and how far. “The widest powers” means no ceiling is written down: the manager can borrow, give security, sell an asset.
A lender will often ask for those powers to be capped, or for large decisions to go to the partners. That is the lender’s policy, not the law, and it is easy to prepare for.
Article 14 · Financial year1 January to 31 December
The closing date of the financial year. It tells you which accounts you can produce, and how recent they are.
Worked example, made up for the exercise. Articles 7 and 11, marked, decide what is possible.
Public and private
The articles are public, the agreement is private
Articles are filed: in Madagascar at the trade and companies register, in Mauritius with the Registrar of Companies. Anyone can obtain a copy, including an investor who has not yet written to you.
The shareholders’ agreement is filed nowhere. Nobody can demand it: you decide whether to show it, and to whom.
In Mauritius, the Companies Act 2001 allows a company to have no constitution, the Mauritian name for its articles. The Act’s default rules then apply. Some founders only find out on the day someone asks for the document.
- Binding on everyone, third parties included
- Amended in general meeting, at the majorities they set
- Open to inspection at the register
- Binds only those who signed it
- Amended by agreement of the signatories, without formality
- Invisible to third parties
The general rule in Malagasy law and other French-inspired systems; it varies by country. That is why a clause that matters is often written into both, where the law allows it.
- The agreement, clause by clause
- Who decides with whom
- Does this decision pass without you?
- When the two disagree
- What delays a file
- What you produce
The rest of the lesson
Keep reading with your free account
6 more parts, with the calculations on your own numbers and what to write in your file. The account is free, no commitment.
The words of this lesson
Each word links to its full definition in the glossary.
- Articles of association
- The company's founding contract: who decides what, by what majority.
- Shareholders' agreement
- The agreement between shareholders, alongside the articles, on what they promise each other.
- Drag-along
- When a buyer wants 100% of the company, the partners holding the threshold set in the clause can oblige the others to sell, on the same terms.
- Tag-along
- When a partner sells its stake, the minority partners can sell theirs alongside it, on the same terms.
- Preferred shares
- Shares that give the investor rights beyond the other partners: being paid first, voting on certain matters.
- Confidentiality undertaking
- The contract where the investor promises not to repeat what they read, nor deal with your contacts behind your back.
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