Shareholder Agreements — A Global-to-Bangladesh Playbook by TRW Law Firm (2025)

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TRW Law Firm is the largest international law firm in Bangladesh. We advise venture-backed companies, conglomerates, family groups, sovereign/PE funds and cross-border joint ventures on shareholder agreements (SHAs) across Bangladesh, the UK/EU, the U.S., GCC (including DIFC/ADGM), and Asia hubs such as Singapore. This guide distills world-class drafting standards and enforcement strategies, tailored to Bangladesh while reflecting global best practice—so your governance is investable from Dhaka to Delaware.

What a Shareholder Agreement Actually Does (and Why It Matters)

A Shareholder Agreement is the private constitution of a company: it sits alongside the charter (MoA/AoA/articles) and sets the rules of ownership, control, economics, exits, and dispute resolution. Globally, sophisticated SHAs:

• Allocate board power, vetoes, and information rights.
• Lock in transfer mechanics (ROFR/ROFO, tag/drag, lock-ins).
• Engineer capital structure (anti-dilution, liquidation preferences).
• Protect the business (non-compete, non-solicit, IP assignment, confidentiality).
• Provide deadlock escapes (buy-sell mechanisms, mediation/arbitration).
• Anticipate cross-border enforcement and currency/regulatory constraints.

In Bangladesh, a strong SHA complements the Companies Act framework and ensures enforceable investor protections without routinely amending the Articles. In cross-border holdings (e.g., a Singapore or Delaware TopCo with a Bangladesh OpCo), the SHA also coordinates multiple tiers to prevent gaps between parent-level rights and local operations.

Global Context at a Glance

[■] Delaware/US VC & Growth: strong preference stacks, broad protective provisions, detailed information and audit rights, customary drag/tag, weighted-average or full-ratchet anti-dilution, robust founder vesting and IP.
[■] UK/EU & Common-Law: granular reserved matters, pre-emption on new and existing shares, drag thresholds 50–75%+, tag for minorities, leaver provisions, W\&I alignment with SPA.
[■] Singapore/ASEAN: hybrid of US/UK; emphasis on governance hygiene, vetoes keyed to regulatory consents, institutional investor reporting cadence.
[■] GCC (DIFC/ADGM): English-law style SHAs with onshore/offshore bifurcation; FDI and local sponsor rules often mirrored via nominee or side documents—careful enforceability planning is critical.
[■] Bangladesh: SHA must integrate with RJSC filings, local licensing, and foreign exchange rules; care around transfer approvals, stamp duty, and sector-specific constraints; dispute resolution frequently via arbitration (SIAC/LCIA/ICC) with Bangladesh law or English law governing.

Core Building Blocks of a Bankable SHA

1) Equity & Capital Structure

• Classes of shares (ordinary/pref/convertible) and waterfall on exits.
• Pre-emption on new issues; anti-dilution (broad-based weighted average commonly acceptable to founders; full-ratchet reserved for distressed rounds).
• ESOP design and overhang; consent thresholds for pool increases.

2) Governance & Control

• Board composition (investor/independent/founder seats), quorum, and alternates.
• Reserved matters (veto list) scaled to ownership tiers: e.g., changes to share capital, major borrowings, M\&A, related-party transactions, budgets, key hires/fires, dividends, liquidation.
• Information & audit rights: monthly MIS, quarterly unaudited numbers, annual audit, data room access during financing/exits.

3) Transfer Mechanics

• Lock-in for a defined period post-close; permitted transfers within a group or to affiliates.
• ROFR/ROFO: offer to existing holders before selling to third parties.
• Tag-along: minority rights to sell proportionately in a majority sale.
• Drag-along: compel minority to sell once a supermajority accepts a bona fide offer (clean drag docs, same terms, same consideration type).
• Buyback routes (subject to law, solvency, and approvals).

4) Economics & Exit

• Dividend policy, distribution waterfalls, and debt service priorities.
• IPO try/drag, trade sale, secondary sales, put/call options (with valuation formulas and long-stop dates).
• Liquidation preference: 1x non-participating is “market”; participating preferences require caps and conversion mechanics.

5) Founder & Management Protections

• Vesting and reverse vesting; good/bad leaver definitions.
• Non-compete/non-solicit (tailored to Bangladesh restraint-of-trade principles and global reasonableness standards).
• IP assignment & moral rights waivers; invention disclosure processes.

6) Compliance, Integrity & Data

• Anti-corruption/AML, sanctions, data protection, ESG undertakings.
• Related-party transactions rules, approval matrix, and periodic certifications.

7) Deadlock & Disputes

• Escalation ladder: management → board → principals; then mediation (time-boxed).
• Buy-sell mechanics for 50/50 JVs:
• Russian Roulette, Texas Shoot-Out, Dutch Auction—use with safeguards (financing ability tests, cooling-off, valuation floors).
• Arbitration seat, rules (SIAC/ICC/LCIA), governing law, and interim relief capability (injunctions, emergency arbitrator).
• Court jurisdiction for non-arbitrable issues and enforcement support.

Bangladesh Nuance (and How We Align It with Global Investors)

• Corporate filings: keep the SHA private, but mirror key transfer/issue controls in Articles/Board policies where necessary to avoid third-party surprises.
• Share transfers: observe board approvals, stamp duty and any sectoral or foreign ownership caps; align SHA with RJSC processes and registers.
• Financing & security: lender consents for share pledges/negative pledges; intercreditor alignment if multiple financiers exist.
• Foreign investment: channel capital and dividends via compliant FX routes; capture repatriation mechanics and tax gross-ups in the SHA/ancillaries.
• Employment & restraint: calibrate non-competes to be reasonable in duration, geography, and scope; consider confidentiality + non-solicit as primary enforceable levers.
• Arbitration & enforcement: for cross-border SHA, choose international arbitration and a seat with New York Convention enforceability. Where the TopCo is offshore, ensure parallel covenants at Bangladesh OpCo level or deeds of adherence by key local parties.

Cross-Border Architectures We Frequently Design

A) Offshore TopCo, Bangladesh OpCo

• TopCo SHA (Delaware/Singapore/UK law) governs investor economics and global governance.
• OpCo joinder binds the Bangladesh company on operational covenants (budgets, hiring, IP, compliance).
• Intercompany agreements (IP licence, services, cost-sharing) ensure cash and control flow legally.

B) JV Between Foreign Investor and Bangladesh Sponsor

• Bangladesh JVCo SHA under Bangladesh or English law; shareholders’ reserved matters married to sector approvals.
• Deadlock protections with buy-sell and put/call windows; local nominee issues replaced by clear beneficial ownership statements and registrable rights.

C) Multi-OpCo Regional Platform

• Master SHA at HoldCo; local SHAs harmonised but tailored for licensing and labour rules.
• Drag-through mechanics ensure exit at HoldCo drags underlying OpCos; option pools and management LTIPs centralised at HoldCo for consistency.

Venture, Growth, PE & Family Business — How Terms Differ

• Venture/Seed: simpler vetoes, strong founder IP and vesting, broad information rights; 1x non-participating preference typical.
• Growth/PE: detailed reserved matters, financial covenants, audit rights, and performance ratchets; board committees (audit, risk, remuneration).
• Family enterprises: governance modernization (family charter, conflict rules), succession and share transfer to bloodline/family trusts, dividend discipline, and professional management protections.

Drafting to Enforcement: The TRW Method

Phase 1 — Term Sheet Architecture (Week 0–2)

• Map capital table; define class rights, liquidation preference, anti-dilution logic, ESOP.
• Agree veto matrix and board structure; fix exit windows.
• Choose governing law and arbitration seat with enforcement practicality.

Phase 2 — Documents & Alignment (Week 2–5)

• Draft SHA + Articles updates; ESOP plan; IP assignment; founder service/vesting docs.
• Prepare deeds of adherence, intercompany and licensing agreements.
• Regulatory and RJSC filing plan; stamp duties and consents calendar.

Phase 3 — Signing, Closing, Filings (Week 5–8)

• Closing checklist; conditions precedent (CPs); funds flow; share certificate logistics.
• File necessary forms and update statutory registers; issue ESOP grant letters.
• Data room of final executed documents for investor and audit.

Phase 4 — Live Operation (Post-Close)

• Compliance calendar (board/AGM, filings, licences).
• Periodic SHA health-checks; adjustments to vetoes and committees as cap table shifts.
• Exit readiness: diligence archives and KPI cadences for buyers/IPO.

Clauses to Get Right (with Practical Drafting Notes)

1. Reserved Matters

• Use tiered thresholds (ordinary vs. special decisions).
• Tie specific items to budget deviations (e.g., capex/opex variances >10%).

2. Anti-Dilution

• Prefer broad-based weighted average (formula defined) with carve-outs: ESOP refreshes, strategic issuances within a board-approved cap.

3. Drag & Tag

• Drag threshold (e.g., 66⅔% or 75%), price protection for minorities, and same terms same consideration language; tag applies to any controlling sale.

4. Founder Leavers

• Define cause precisely; include reverse vesting and buy-back price grids (FMV vs. nominal for bad leavers).

5. Confidentiality & IP

• Strong IP assignment with future works; confidential info exceptions for law, investors’ LP reporting, and financing.

6. Dispute Resolution

• Arbitration rules (SIAC/ICC/LCIA), seat, language; interim relief in courts preserved; multi-tier escalation to encourage settlement.

7. Compliance & ESG

• Certifications, audit rights on integrity, sanctions adherence, and termination/exit options if breached.

Bangladesh Process Toolkit (What We Actually Do)

[■] Draft SHA, Articles amendments, board & shareholder resolutions.
[■] Prepare CP list: regulatory consents, comfort letters, tax/GST/VAT confirmations, lender waivers (if pledges/negative pledge).
[■] Coordinate RJSC filings and statutory register updates.
[■] Structure FX-clean inflows/outflows and dividend/distribution mechanisms.
[■] Prepare employment/IP documents and ESOP paperwork.
[■] Build a compliance calendar and board committee charters.
[■] Implement data room and reporting packs for ongoing investor relations.

SEO-Smart FAQs (curated for client search intent)

Q1. Is an SHA enforceable if it conflicts with the Articles?
Priority varies by jurisdiction. Best practice is to align key SHA provisions with Articles (or the constitution) and ensure third parties can’t claim ignorance.

Q2. Can I use a single SHA for a holding company and all operating subsidiaries?
Use a Master SHA for HoldCo and local joinders/SHAs for each OpCo, ensuring drag-through and consistent governance while accommodating local law.

Q3. What’s “market” for liquidation preference today?
1x non-participating remains standard for growth rounds; participating preferences are negotiated with caps and conversion rights.

Q4. How do we protect minority investors in Bangladesh?
Strong reserved matters, tag, information/audit rights, and access to international arbitration backed by carefully drafted governing law and enforcement pathways.

Q5. Which arbitration seat should we pick?
Choose a New York Convention jurisdiction with a pro-arbitration judiciary (e.g., Singapore/England). We often pair an English-law or Singapore-law SHA with Bangladesh OpCo covenants.

Common Pitfalls We Eliminate

• SHA says one thing; Articles say another → Harmony pack of amendments & board policies.
• Drag drafted without minority price protections → add floor/valuation and “same-terms” mechanics.
• Anti-dilution too aggressive → kills future rounds → adopt broad-based WA with carve-outs.
• FX and tax flows ignored → distributions choke → build repatriation and gross-up clauses.
• Founder IP not assigned → disputes at exit → execute assignment & invention deeds at signing.
• Local licenses/contracts not transferable → operational gaps → novation plan and sequencing.

How TRW Works With You

• Global standard, local enforceability. We draft to U.S./UK/Singapore norms while making the Bangladesh layer bankable and registrable.
• Speed with discipline. Term sheet in days, full SHA pack rapidly, filings sequenced.
• Investor-grade outputs. Clean documents, cap table models, ESOP math, board packs, and disclosure schedules.
• Cross-border co-counsel. We coordinate with your international counsel so there’s one source of truth.

Explore related insights on our site: tahmidurrahman.com.

Summary Table — Shareholder Agreements (Global → Bangladesh)

Engage TRW — Next Steps

1. Share your cap table, target structure (TopCo/OpCo), and objectives (round, JV, exit).
2. We issue a Term Sheet within days, with choice-of-law and arbitration recommendations.
3. We deliver a full SHA pack, Articles amendments, ESOP, founder/IP, and a close-ready checklist—including Bangladesh filings and FX/tax pathways.

TRW Law Firm — Corporate, M\&A & Cross-Border Investments Team
Phone: +8801708000660 • +8801847220062 • +8801708080817
Email: info@trfirm.com • info@trwbd.com • info@tahmidur.com
Global Locations:

• Dhaka: House 410, Road 29, Mohakhali DOHS
• Dubai: Rolex Building, L-12 Sheikh Zayed Road