CONDITIONAL SHARE OWNERSHIP BY SHAREHOLDER-MANAGER: LEGALANALYSIS OF THE INCORPORATION AGREEMENT AND THE COMPANY CHARTERUNDER KOSOVO’S LEGAL FRAMEWORK
DOI:
https://doi.org/10.46763/SCGW25112g155pkAbstract
The conditional awarding of shares to shareholder-manager is a mechanism that can be found in business agreements, particularly in startups, private equity transactions and corporate governance arrangements. This paper examines the legal validity and enforceability of agreements under the Kosovo legal framework that provides a shareholder-manager to own shares upon the condition of the fulfilment of certain business targets. While these mechanisms are meant to align managerial performance with shareholder interests, their legality under the current legislative framework in Kosovo is questionable. This research discusses the use of the corporate charter and the incorporation agreement in setting out the terms of share ownership. It explores the legality of having such provisions in the company’s constituting documents and determines how judicial bodies, such as courts and arbitration tribunals, may interpret these provisions. Besides, this paper explores the primary risks and advantages for companies and shareholder-managers, including protection against poor performance, the threat of shareholder disagreements, and the enforceability of vesting and cliff-period structures. The paper presents a comparative analysis of corporate governance norms in the European Union (EU) and private equity practices in the United States (U.S.), highlighting best practices for the design of conditional share ownership agreements. It also discusses the role of commercial courts and arbitration in resolving disputes arising from such agreements, assessing whether the legal framework in Kosovo provides sufficient guarantees for contractual certainty and business stability. The research concludes with practical suggestions for businesses, investors and attorneys, recommending legislative clarifications and contract drafting techniques to make shareholder agreements both legally effective and enforceable. Consolidating the legal framework on conditional share ownership is bound to foster a more investor-friendly and stable business environment in Kosovo, thereby stimulating heightened corporate transparency, accountability and long-term sustainable value creation.
Keywords: business law, shareholder, manager, share-based compensation, vesting, EU, Kosovo.
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