Investor relations are a partnership that, in many ways, resembles a marriage

04.09.2025

• So that the family boat does not smash on the reefs of everyday life
• A clause on marital fidelity
• Mothers-in-law, fathers-in-law and other relatives
• We are getting divorced after all
• Contact a lawyer for further information

At the outset, everything seems simple: shared goals, mutual trust and confidence in success. However, the real test comes when the business faces serious difficulties or when truly large sums of money are at stake. It is in such moments that it becomes clear how solid the foundations of the relationship are and whether the rights and obligations of each party have been clearly defined. Minor disagreements can escalate into fundamental conflicts capable of destroying not only the partnership but the business itself.
That is why far-sighted entrepreneurs shore up the relationship legally in advance.

A properly drafted charter, a thoroughly developed shareholders’ agreement/participants’ rights agreement for a limited liability company, and other legal instruments become an insurance policy that will help preserve the partnership in difficult times and ensure the fair resolution of contentious situations.

So that the family boat does not smash on the reefs of everyday life

The actual management of any company is carried out by the director as the sole executive body in a commercial company (or, if a collegial executive body has been created in the company—a directorate—by the chair of the directorate as its head). Accordingly, whoever controls the director controls the company’s day-to-day operations. To safeguard the interests of both the founders of the commercial company and the investors, at the initial stage of forming the company it is prudent to provide for a system of checks and balances by which neither party can use the director for its own purposes to the detriment of the other.

This can be done in several ways:

Provide in the charter for a board of directors (supervisory board) in the company and transfer to it part of the director’s powers.

In practice, this often includes restrictions such as the director’s right to enter into transactions involving real estate or key assets only with the consent of the board of directors, or the need for prior board approval for any transactions above a set threshold (for example, over 300,000 Belarusian roubles or the equivalent of USD 100,000). Powers relating to the hiring and dismissal of key employees are also often reserved to the supervisory board, especially in companies focused on software or technology development, in order to avoid a “brain drain” from the project. At the same time, to balance the interests of the company’s founders and the investors, a special procedure for electing members of the board of directors is quite often established. For example, half are appointed by the investor and the other half by the company’s founders. Or the number of members appointed by each participant is determined in proportion to its stake.

Make the role of the auditor (audit commission) in the company not nominal (as happens in most cases) but real.

Under the legislation, at the request of the auditor (audit commission), the director and employees vested with decision-making authority arising from their powers, employment or related relationships are obliged within the prescribed period to provide the documents necessary for an audit or inspection of financial and business activities, as well as to give comprehensive explanations orally and/or in writing. Thanks to the auditor, an investor, for example, can promptly check the company’s financial statements and learn about its condition without needing to engage an external audit firm.

Refer key matters of the company’s activities to the general meeting of participants.
Let us recall that Belarusian law allows almost any matters within the remit of lower-level bodies (the board of directors and the director) to be transferred to the general meeting. Therefore, issues of fundamental importance in the activities of a commercial company can be decided at general meetings of participants, where the founders and the investor are personally present. At the same time, the parties may agree that on certain issues the investor will have the casting vote, and on others—the founders. This can be done by means of a non-proportional allocation of votes at the meeting relative to the participants’ stakes (if we are talking about a limited liability company) or through obligations set out in a shareholders’ agreement (for a closed/open joint-stock company), in which the parties’ obligation to vote in a specified manner can be stipulated.

A clause on marital fidelity

In relations with an investor, as in marriage, mutual fidelity plays an important role. The parties often agree not to “bring” outsiders into the business without each other’s consent. This sort of marital-fidelity clause protects the interests of existing partners and prevents dilution of control over the company.

As a general rule established by the Law “On Commercial Companies”, the other participants in a limited liability company have a pre-emptive right to purchase the stake of a participant who is exiting, unless the charter or a unanimous resolution of the general meeting provides for a different manner of exercising this right. Moreover, the legislation also permits a prohibition on selling a stake to third parties if this is set out in the company’s charter. These mechanisms help preserve control of the company in the hands of those who were originally the founders and who entered into an agreement with the investor on certain terms.

A shareholders’ agreement and a participants’ rights agreement for a limited liability company may also provide for an obligation to refrain from disposing of a stake until certain circumstances occur, as well as from disposing of shares in an open or closed joint-stock company. It is important to note, however, that a participant in a limited liability company has the right at any time to withdraw from the company regardless of the consent of the other participants, and this right cannot be restricted.

Mechanisms of tag-along and drag-along play a special role in ensuring corporate fidelity. The tag-along right (right of co-sale) protects minority participants by allowing them to sell their stakes on the same terms as the majority participant. If a major shareholder decides to sell their stake to a third party, the minority are entitled to join the transaction pro rata to their holdings.

The drag-along right (right of compulsion) operates in the opposite direction. It enables the majority participant to compel the minority to sell their stakes together with its stake on the same terms. This mechanism is particularly important when selling the entire business, where the buyer wants to obtain 100% control of the company.

These tools ensure a balance of interests: majority participants cannot leave minority holders behind in a company with an unknown new controlling person, and the minority cannot block a favourable sale of the business.

Thus, the marital-fidelity clause becomes a double-edged sword that protects the interests of all participants and ensures predictability in their future relations.

Mothers-in-law, fathers-in-law and other relatives

Even with the most careful agreements on mutual fidelity, third parties whom no one planned to see as partners can unexpectedly enter the business. As in family life, where one has to accept a spouse’s relatives with all their peculiarities, in corporate relations “uninvited guests” may appear in the form of heirs or former spouses of participants.

The legislation provides for the possibility of a stake passing to the heirs of a deceased participant; however, this can be excluded by stipulating in the charter of the limited liability company that such a transfer of a stake requires the consent of the other participants (whether unanimous or not is decided when forming the charter). There is, however, a hidden rock: refusal to consent to the transfer of a stake in the charter capital of a limited liability company entails the company’s obligation to pay the heirs of the deceased participant the actual value of the stake in the charter capital (equal to the value of the company’s net assets proportionate to the stake of the deceased participant) or, with the heirs’ consent, to transfer to them assets in kind corresponding to that value.

In joint-stock companies the situation is different. Heirs automatically become shareholders, acquiring all the rights associated with the shares they hold. This can be limited only through a will, in which the testator may establish certain conditions for inheritance or designate specific heirs. However, a will is a closed document, the contents of which are unknown until the shareholder-testator’s death, and it can be changed at any time without notifying business partners.

A participant’s divorce can be no less painful for the company than for the family itself. A business interest is, as a rule, marital property acquired jointly by the spouses, and upon divorce the former spouse may claim half of that interest.
Particularly difficult situations arise when a former spouse, having received a stake during the division of property, begins actively to participate in the management of the company or, conversely, hinders decision-making in every possible way. Imagine a situation where your business partner divorces, and his former wife becomes a co-owner of the business and appears at general meetings of participants with her own vision for the company’s development.

The most effective way to protect against such family surprises as divorce is for each business participant to conclude a prenuptial (marital) agreement. Such an agreement can designate the company stake as the personal property of the spouse-participant, thereby excluding its division upon divorce. Although partners cannot be compelled to conclude prenuptial agreements, this can be recommended as a matter of corporate hygiene.

We are getting divorced after all

No matter how carefully relations with an investor are planned, sometimes partners’ paths diverge. Conflicts of interest, different views on business development or simple fatigue from working together can make a corporate divorce necessary. And here, as in family relations, it is important to agree in advance on how exactly the division of property will proceed.

Clear definition of exit conditions from the business is an insurance policy against drawn-out conflicts and litigation. The shareholders’ agreement or the charter should set out specific situations in which the parties may demand the buy-out of their stakes. This might be a radical change in the company’s strategy, failure to meet the business plan, gross violation of corporate agreements or simply one party’s desire to focus on other projects.

It is especially important to provide an exit procedure for cases of deadlock—situations in which the participants cannot agree on fundamental issues and the company is effectively paralysed. In such cases, the right to exit becomes the only way to resolve the conflict.

The classic withdrawal of a participant from a limited liability company seems a simple solution, but there is a significant money-related nuance. The company is obliged to pay the participant the actual value of their stake, but only within the limits of net assets. If the company does not have sufficient funds or if payment may lead to insolvency, obtaining the money may drag on indefinitely.
Moreover, mass withdrawals by participants can seriously undermine the company’s financial stability. Imagine a situation where several major participants simultaneously decide to withdraw from the limited liability company—the company may simply be unable to bear such payments and go bankrupt.

A more elegant solution is put and call options set out in corporate agreements. A put option gives the right to require the other party to buy out the owner’s shares upon the occurrence (or non-occurrence) of certain conditions at a pre-established price (for example, obstructing the work of governing bodies or decision-making at meetings, etc.). A call option allows the remaining participants to require the other party to sell its shares upon the occurrence (or absence) of certain acts or events (the conditions may mirror those for a put). Put simply, a put option gives a participant the right to demand that other participants or the company itself buy out their stake according to a pre-defined formula, while a call option allows the remaining participants to compel the buy-out of the departing partner’s stake.

The advantage of options is that they allow the valuation mechanism and settlement terms to be determined in advance. This may involve linkage to financial indicators, an independent valuation or pre-agreed sums. It is also important to set out the procedure and timing for payments—lump sum or by instalments—which is especially critical for large amounts.

One of the most painful issues in a corporate divorce is determining the fair value of the stake. There are several tried-and-tested mechanisms:

• “Russian roulette” is straightforward: the first party names the price of its stake, and the second chooses either to buy at that price or to sell its own stake at the same valuation. This forces the proposer to name a truly fair price.
• The “Texas shoot-out” involves sealed envelopes with each party’s maximum purchase price. The higher offer wins and buys the stake at its own price.
• In a “Dutch auction”, the envelopes state minimum sale prices; the highest price wins, but the purchase is made at the losing party’s price.

Thus, bringing an investor into a business really does resemble starting a family—these are long-term relations requiring mutual respect, trust and clear rules of the game. As in marriage, romantic illusions quickly dissipate when it comes to real problems and serious decisions.

Corporate agreements, charters and legal mechanisms are not bureaucratic formalities but vital insurance against conflict. They allow partners to focus on developing the business rather than on sorting out their relationship. A properly structured system of corporate governance protects the interests of all sides: the founders, the investors and potential minority holders.

Ultimately, a successful partnership with an investor is built on the understanding that conflicts are inevitable and separation is possible. Paradoxically, it is precisely the preparedness for divorce that often helps preserve the relationship—when everyone knows the exit rules, no one feels like a hostage. This creates a healthy environment for joint work and enables the business to prosper despite all the human frailties of its participants.

Authors: Nikita Tolkanitsa, Matsvei Shastsiarniou.