Why your Articles of Association and Shareholders Agreement must speak the same language
When establishing a company in Romania, just as in most European and non‑European jurisdictions, two core documents form the foundation of the company’s legal framework: the Articles of Association and the Shareholders’ Agreement.
However, despite their complementary nature, these documents can overlap on key issues, leading to conflict or ambiguity. But before addressing those scenarios, it is important to briefly understand what each document represents and why both matter.
What are the Articles of Association?
The Articles of Association are the mandatory document required for incorporating any company. It sets out the general legal rules for operating the business, including, but not limited to: the company’s name, registered office, and scope of activity; share capital and ownership structure; management and representation rules; and basic decision‑making procedures.
Because the Articles of Association are filed with the Trade Registry, it is a public document and kept fairly simple.
What is a Shareholders’ Agreement?
Unlike the articles of association, the Shareholders’ Agreement is not mandatory for incorporation. However, in practice, it is far more than a “nice to have”.
A Shareholders’ Agreement is a private contract between shareholders that governs their internal relationships. It allows founders to include here matters that are more detailed, sensitive, or strategic than in the articles of association.
In addition, a Shareholders’ Agreement allows a greater flexibility covering everything from dividend policy and funding obligations to rights of first refusal on share sale agreements, drag-along/tag-along provisions, and good leaver/bad leaver obligations.
A key feature of a Shareholders’ Agreement is its requirement for unanimous consent for any amendments, as it is a contractual instrument that can only be modified with the agreement of all parties who originally signed it. This ensures that no shareholder can unilaterally alter its terms.
In other words, the Shareholders’ Agreement protects the founders from each other, from future conflicts, and from unexpected investor dynamics.
For IT start‑ups, where intellectual property, equity distribution, and rapid scaling are central, the Shareholders’ Agreement is often the only document that truly reflects the business reality.
Why do conflicts between Articles of Association and Shareholders’ Agreement occur
Although both documents aim to regulate the company, they do so from different angles:
• The Articles of Association govern the company’s legal existence and public structure.
• The Shareholders’ Agreement governs the private relationship between shareholders.
The key takeaway is that neither document replaces the other; they serve different purposes and must operate together.
Conflicts arise when the Shareholders’ Agreement contains provisions that contradict the Articles of Association or the law.
In such cases, the Articles of Association prevail against third parties because it is a public corporate document, whereas the Shareholders’ Agreement governs only the internal relationship between shareholders and cannot be enforced against third parties.
No undisclosed agreement can override the Articles of Association.
This is why both documents must be drafted in harmony, ideally at the same time, by professionals who understand both corporate law and the company's specific dynamics.
The risks associated with a conflict between the Shareholders’ Agreement and the Articles of Association depend on which document is breached:
A breach of the Shareholders’ Agreement gives rise to contractual liability (damages, etc.).
A breach of the Articles of Association can render the corporate decision invalid or void, with effects against the company and third parties.
However, even though the Articles of Association generally prevail, there is a practical solution: the Shareholders’ Agreement may include a clause requiring the shareholders and directors to amend the Articles of Association whenever a conflict arises, so that the Articles of Association are aligned with the Shareholders’ Agreement. This mechanism ensures that any inconsistency is promptly eliminated.
Why your start‑up should not operate without a Shareholders’ Agreement
Many founders postpone signing a Shareholders’ Agreement because they trust each other - until something goes wrong.
Unfortunately, most disputes arise not from bad intentions but from different expectations, unclear responsibilities, unequal contributions, changes in personal circumstances, or even investor pressure.
A Shareholders’ Agreement anticipates these scenarios and provides mechanisms to handle them without damaging the company. For start‑ups, the Shareholders’ Agreement is also a signal of maturity. Investors expect it.
Conclusion
Relying on the common Articles of Association without a Shareholders’ Agreement in place may be a short-term solution in the early stages of the business. However, in the event of disagreements, fundraising, or considering a potential exit, the absence of a comprehensively drafted Shareholders’ Agreement may result in costly disputes.
It is far easier and far less costly to prevent a conflict than to resolve one after it has already escalated.
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The content of this article is general information, not tailored legal advice for your specific situation. It has a strictly informative and general purpose; the information contained does not constitute legal advice.
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