What is a Shareholder’s Agreement? Shantanu 4th Yr. NLU, Odisha
Shareholder’s Agreement (contd…)• It is an agreement between the shareholders of a company which outlines the shareholder’s rights and obligations.• It may include provisions relating to the regulation of shareholders’ relationship, the management of the company, ownership of the shares and privileges and protection of the shareholders.
Shareholder’s Agreement• Objective – shareholders are treated fairly.• It is not mandatory under Indian law.• It is binding only on the parties to the agreement.
Application• Applicable only upon the parties to the agreement.• Provisions of the agreement should be included in the Articles to make it applicable upon the third parties.
Provisions (contd…)• Appointment of directors• Quorum requirements• Matters which require special resolution• Giving veto rights to certain shareholders• Financing the requirements of the company• Restrictions on free transferability of shares (in pvt. companies)
Provisions• Minority rights• Defining the obligations of shareholders
Limitations• It cannot contain any such provision which may oblige the director(s) to compromise his fiduciary duties.• In case of a public company, a shareholder’s agreement cannot put any restriction on the transferability of shares.