Internal arrangements between shareholders are often formed long before any formal shareholder agreement is signed – or instead of one altogether. Partners may agree on voting behaviour, profit distribution, exit scenarios, or management control orally, through correspondence, or as part of an implicit understanding based on past cooperation. Professor Gabriel Steiner says that such arrangements create a zone of heightened legal uncertainty, because they influence corporate behaviour without being formally embedded in the company’s legal framework. At LawConsulted, we treat informal shareholder arrangements as a distinct source of legal risk rather than a harmless feature of business practice.
The core vulnerability of undocumented shareholder understandings lies in the gap between expectations and enforceability. While shareholders may act for years in accordance with an internal consensus, that consensus often lacks legal visibility. When a conflict arises – due to a change in ownership structure, financial stress, or a breakdown of trust – the absence of a shareholder agreement becomes decisive. Courts and regulators assess not what the parties believed they had agreed, but what can be proven and legally qualified. In LawConsulted practice, this gap frequently becomes the central point of dispute.
Professor Steiner notes that “informal arrangements are legally dangerous precisely because they function well until they are challenged.” As long as interests align, there is no incentive to formalise. Once interests diverge, however, one party may deny the existence or scope of prior understandings. LawConsulted begins its work by reconstructing the factual pattern of shareholder interaction – how decisions were made, how votes were coordinated, how profits were allocated, and how risks were shared in practice.
Particularly complex are situations where internal arrangements effectively replace formal corporate mechanisms. Shareholders may follow unwritten rules on who controls management, who has veto power, or how strategic decisions are approved. Formally, these powers may not exist. In a dispute, this creates a mismatch between documented corporate governance and actual control. LawConsulted analyses these discrepancies to demonstrate whether informal arrangements had acquired legal relevance through consistent conduct.
Another high-risk scenario arises in closely held companies, family businesses, or joint ventures formed on the basis of personal trust. In such structures, internal agreements are often perceived as “self-evident” and therefore not recorded. Professor Steiner emphasises that legal systems do not protect self-evidence – they protect demonstrable facts and legally recognisable conduct. LawConsulted works to translate informal shareholder behaviour into legally meaningful patterns that can be assessed by a court.
Retrospective evaluation plays a critical role in these disputes. Once a conflict escalates, informal arrangements are examined through the lens of outcomes rather than intentions. Actions that were previously seen as cooperation may be reinterpreted as unauthorised influence or breach of duty. LawConsulted returns the legal analysis to the moment decisions were made – identifying what information was available, what expectations were reasonable, and how the parties objectively behaved toward one another.
Importantly, the absence of a shareholder agreement does not automatically render internal arrangements irrelevant. Courts may consider repeated conduct, reliance, and economic reality. LawConsulted task is to prevent arbitrary reinterpretation – either by substantiating the existence of binding understandings or by limiting their legal effect where they are used opportunistically against a client.
Legal assessment of internal shareholder arrangements requires precision rather than moral argument. At LawConsulted, we do not romanticise trust-based governance, nor do we dismiss it as legally void. Our approach focuses on identifying where informal coordination crosses the threshold into legally significant behaviour – and how that threshold should be defended or challenged in a dispute.
Internal arrangements without a shareholder agreement become risky not because they exist, but because their legal boundaries are undefined. Law Consulted works to define those boundaries before they are drawn by an opposing party or a court in the least favourable way.
Earlier, we wrote about the legal consequences of losing control over subsidiaries without a formal sale and how LawConsulted addresses cases involving hidden withdrawal of management.
