A sample shareholders’ agreement — reading the "rules of the game" that protect founders and investors alike
🎯 Goal: Read and understand the backbone clauses of a Shareholders’ Agreement (SHA) — vesting, ROFR, tag-along, drag-along, liquidation preference, anti-dilution, veto rights — and know WHO each clause protects, so you never blindly sign a template pulled off the internet.
Many Vietnamese startups fight, and some fall apart, not from running out of money but from never writing the "rules of the game" for when someone leaves, when a new investor arrives, or when the company is acquired. A shareholders’ agreement (SHA) fills that gap: it spells out who decides what, how shares vest gradually, whom you must offer shares to before selling, and how money splits when it sells. This lesson unpacks each clause, with a template table and a numeric example of liquidation preference, checked against Vietnam’s Enterprise Law 2020. You’ll leave able to read an SHA and see who each clause favors — but this is for LEARNING only.
Lesson content
🔍
What is an SHA, and how does it differ from the Charter? A Shareholders’ Agreement (SHA) is a contract among the shareholders themselves, setting the "rules of the game" alongside the company Charter. The core differences: • The Charter is a public document filed with the registrar, binding the company and all shareholders under the Enterprise Law. • The SHA is a private agreement among the signing parties, more flexible, going into details the Charter usually omits: vesting, ROFR, tag/drag-along, liquidation preference and more. Where the two conflict, matters reserved to the Charter/Law still prevail, so the important SHA clauses are usually mirrored into the Charter to make sure they’re enforceable. A good SHA prevents conflict and protects both founders and investors when things go sour.
⚖️
Framework — 4 groups of backbone clauses (read step by step): Step 1 — Keep people (Vesting): a founder’s/employee’s shares are granted gradually over time, commonly 4 years with a 1-year cliff (nothing vests before year one). Anyone who quits early doesn’t walk off with all the shares. Step 2 — Control who gets in (ROFR): the right of first refusal — before selling shares to outsiders, you must offer them to existing shareholders first, so shares don’t slip to strangers. Step 3 — Protect the minority (Tag-along): when a major shareholder sells, minority holders may sell alongside on the same terms and price, not left behind. Step 4 — Gather enough to sell (Drag-along): when the majority at a defined threshold agrees to sell the company, they can "drag" minority holders to sell too, so the M&A deal is whole 100%. These four answer four questions: who keeps their shares, who gets in, who sells alongside, and how to sell the whole thing.
🧰
TOOL — SAMPLE / CHECKLIST of SHA clauses (LEARNING only). Read the table in 3 columns: clause, plain meaning, and a note for negotiation.
Clause
Plain meaning
Note
Vesting
Shares granted gradually over time contributed
Common 4 years, 1-year cliff; stops "grab shares and vanish"
ROFR — Right of first refusal
Must offer to existing shareholders before selling outside
Keeps shares "in the family", avoids strangers
Tag-along
Minority can sell along on the same terms as a big holder
Protects the minority from being left behind
Drag-along
The majority selling can drag minority to sell too
Enables a 100% M&A; needs a clear % threshold and fair price
Liquidation preference
On sale/liquidation, investors get paid BEFORE common holders
Often "1x non-participating"; high multiples (2x) hurt founders
Anti-dilution
Protects investors when a later round prices LOWER (down round)
"Weighted average" is milder than a harsh "full ratchet"
Veto rights
Some major decisions need investor consent
Limit to key matters; a long list ties the operators’ hands
Reading tip: the "Note" column tells you which way a clause leans and where the negotiation lives.
🇻🇳
VN case study — step by step, against Enterprise Law 2020: Situation: a team of 3 founders (An 40%, Binh 35%, Chi 25%). After 6 months, Binh leaves but demands to keep all 35%. Meanwhile the seed investor asks for a "2x liquidation preference". Step 1: if the SHA has vesting + a 1-year cliff, Binh leaving before 12 months usually has no vested shares yet → the company repurchases/cancels the unvested portion, avoiding a "ghost shareholder" holding 35%. Step 2: Enterprise Law 2020 says that in the first 3 years, founding shareholders may freely transfer only to other founders; selling to outsiders needs GMS approval — this reinforces the ROFR in the SHA. Step 3: a "2x preference" must be "translated" through preferred shares and distribution clauses in the Charter/GMS resolution to be enforceable in VN; veto rights must also be expressed via voting ratios, not just a private contract. The Civil Code governs contract validity; a clause that breaks the law can be void.
⚠️
Common traps: • Downloading a template and signing blindly: a foreign template may not fit VN’s Enterprise Law, and can be void or cause serious harm. • Drag-along with no % threshold: allowing a forced sale without a defined consent ratio and price floor → the minority gets pushed to sell cheap. • A harsh full ratchet: this anti-dilution style resets the price to the lowest round, diluting founders heavily — "weighted average" is usually fairer. • Veto that ties operators’ hands: an overlong veto list means even small decisions need investor sign-off. • A high liquidation multiple: 2x–3x participating can leave founders with almost nothing on a low-price sale. • No founder vesting: an early leaver keeps all their shares, punishing those who stay.
✅
Checklist before signing an SHA: ① Have I explained each clause in my own words, or just nodded along? ② Does vesting have a clear cliff and grant schedule for all founders? ③ Does drag-along have a % threshold and a fair price floor/condition? ④ Is the liquidation preference 1x or a high multiple, participating or non-participating? ⑤ Is anti-dilution weighted average or full ratchet? ⑥ Has the veto list "ballooned" to the point of tying operators’ hands? ⑦ Are the clauses mirrored into the Charter and consistent with Enterprise Law 2020? ⑧ Has a lawyer reviewed it for my specific situation?
⚠️
Legal disclaimer: everything here, including the template, is for LEARNING only and is not legal advice. A real shareholders’ agreement must be drafted by a lawyer under Vietnam’s Enterprise Law for the specific situation; copying a template and signing it can be void or cause serious harm. This lesson only aims to help you read, understand, and ask the right questions — it does not replace a lawyer.
Practice exercise
🔬 APPLIED EXERCISE: Set up a "hypothetical company" for your team and do two things. (1) Pick 3 clauses from the sample (e.g., vesting, ROFR, drag-along) and rewrite them in your own words, 2–3 sentences each, stating WHO each one protects. (2) For the liquidation preference clause, put a number on it: how much the investor puts in, for what %, then compute how much each side gets when the company sells at two prices (high and low). Note: thinking practice only — a real agreement must be drafted by a lawyer under VN Enterprise Law.
Worked template: FILLED EXAMPLE — Vesting: "Each founder receives shares gradually over 4 years, with none in year one (1-year cliff). Anyone leaving before 1 year holds no vested shares — this clause PROTECTS THOSE WHO STAY and the company, avoiding a ghost shareholder." Illustrative numbers (not real): an investor puts in 3B VND for 30% with a 1x liquidation preference. Sell the company for 10B → the investor takes 3B first, founders split 7B. If it were 2x, the investor takes 6B first, founders keep only 4B — you can see at once how a high multiple hurts founders.
Quick quiz
1. What is the core difference between a Shareholders’ Agreement (SHA) and the company Charter?
→ The SHA is a private agreement among shareholders, more flexible and detailed; the Charter is a public document under the Enterprise Law
An SHA is a private agreement among shareholders, flexible and detailed (vesting, ROFR…), alongside the public Charter under the Enterprise Law.
2. What does vesting (with a cliff) in a shareholders’ agreement do?
→ Grants shares gradually over time, so early leavers don’t take all the shares
Vesting grants shares gradually over time contributed, with a cliff, so early leavers don’t take all the shares.
3. What is the drag-along clause for?
→ When the majority agrees to sell the company, it drags minority holders to sell too so the deal is whole 100%
Drag-along lets the majority "drag" minority holders to sell too, enabling a full 100% M&A.
4. Liquidation preference means:
→ On sale/liquidation, investors get paid BEFORE common holders
Liquidation preference lets investors recover money BEFORE common holders on sale/liquidation.
5. In which situation does anti-dilution protect investors?
→ When a later funding round prices LOWER than the previous one (down round)
Anti-dilution protects investors when a later round raises at a lower price than the previous one (down round).
6. Why should you NOT download a foreign SHA template and sign it as-is in Vietnam?
→ Because it may not fit VN’s Enterprise Law 2020 and Civil Code, leading to void clauses or serious harm
A foreign SHA template may not fit VN’s Enterprise Law 2020 and Civil Code; signing it blindly can be void or cause serious harm.
Advanced
A deeper framework
At an advanced level, separate economics (splitting money: liquidation preference, participating/non-participating, anti-dilution) from control (power: veto, board seats, drag-along). A term sheet can look "high-valuation" yet slip in a 2x participating liquidation preference that leaves founders with far less real value than the headline number suggests.
For liquidation preference, distinguish non-participating (the investor takes the GREATER of the "capital multiple" and the "pro-rata % share") from participating (takes the capital multiple FIRST, then ALSO shares pro-rata — "double dipping"). For anti-dilution, weighted average adjusts the price by the size of the down round, far milder than full ratchet, which resets the price all the way to the lowest level.
A practical rule: when reading an SHA, ask "in a LOW-price sale, who loses what?". The bad scenario is what reveals whom a clause protects — in a big win, every split looks pretty.
NUMERIC example: 1x vs 2x liquidation preference (illustrative, not real)
Investor puts in 3B VND for 30%
Shared assumption for all scenarios
Sell for 10B — 1x non-participating
Investor gets 3B; founders + rest split 7B
Sell for 10B — 2x non-participating
Investor gets 6B first; founders keep 4B
Sell LOW at 5B — 2x
Investor takes nearly all 5B; founders almost nothing
At the same valuation, a 2x multiple drags down the founders’ share; and on a low-price sale, a high multiple leaves founders with almost nothing. "1x non-participating" is usually fairer.
Common trap: "A high valuation hiding toxic terms": staring at a shiny valuation while ignoring a high-multiple/participating preference, full ratchet, and a long veto list. Founders’ real take-home lives in HOW money is split at a liquidity event, not just in the paper valuation.
Advanced questions
1. An investor puts in 3B for 30% with a 2x non-participating preference. Selling the company for 10B, how much do founders get?
→ 4B (because the investor takes 2×3 = 6B first)
2x means the investor pulls out twice their capital (6B) first; only the remaining 4B is split with founders/common holders. At the same 10B valuation, switching 1x to 2x costs founders an extra 3B.
2. What is the core difference between a "participating" and "non-participating" preference?
→ Non-participating: takes the GREATER of the capital multiple and the pro-rata %; participating: takes the capital multiple FIRST then ALSO shares pro-rata ("double dip")
Participating lets the investor "double dip" (take the preference, then still share the remainder pro-rata), so it is worse for founders than non-participating, where the investor only picks the larger of the two options.
3. Why is "full ratchet" harsher than "weighted average" in anti-dilution?
→ Full ratchet resets the investor’s conversion price all the way to the down-round level regardless of size, diluting founders heavily; weighted average adjusts by round size, so it is milder
Full ratchet reprices as if all prior shares were bought at the lowest price, diluting founders heavily; weighted average only partially adjusts by the new round’s size, which is fairer to founders.
🎯 Real-life mission
REAL-LIFE MISSION: Set up a "hypothetical company" for your team’s idea. (1) Pick 3 clauses from the sample table (e.g., vesting, ROFR, drag-along) and rewrite them in your own words — 2–3 sentences each, stating WHO each protects. (2) Put a number on the liquidation preference: how much the investor puts in, for what %, then compute how much each side gets when selling at two prices (high and low), 1x vs 2x. NOTE: thinking practice only — a real agreement must be drafted by a lawyer under VN Enterprise Law.