Corporate
Reserved Matters: Where Shareholder Agreements Quietly Fail
The clause most often drafted last is the one most often litigated first.
A shareholder agreement is, in practice, a settlement of future disagreements written while everyone is still agreeable. The reserved matters schedule is where that settlement lives — and it is routinely produced at the end of a negotiation, when attention has thinned.
Three failures recur. The first is a threshold set in absolute figures that inflation or growth renders meaningless within two years. The second is a consent right granted without a deadlock mechanism, which converts a protective provision into an indefinite veto. The third is silence on what happens when a consenting party simply does not respond.
The remedy is unremarkable but rarely applied: tie thresholds to a moving measure, pair every consent right with a time limit and a deemed outcome, and test the schedule against three concrete scenarios before signature — a funding round, a senior departure, and a disposal.
Parties who conduct that exercise usually amend between a third and a half of the schedule. The cost of doing so at drafting is an afternoon. The cost of discovering it later is measured in quarters.
This article is general commentary and does not constitute legal advice. No attorney-client relationship arises from reading it. Advice on a specific matter should be sought before acting.