Shareholders Agreement And Articles Of Association India

There have always been conflicting views regarding the statutes of a company and the provisions of the shareholders` pact in India. Each company and shareholder must be aware of the importance and function of a shareholders` pact and related items. At Ram Kishan v. Kanwar Paper Ltd, the petitioner`s name was asked to be removed from the membership list in the absence of written agreement on the matter. Second, it is recommended that all shareholders who participated in the conclusion of the agreement be required to sign the articles in order to make them a true declaration of intent for shareholders, so that the articles are effective and valid beyond doubt. There are no fixed laws to regulate shareholder agreements, but is evaluated on a case-by-case basis. Nor is there a firm orientation towards the law, unlike in most economic-dominated countries where shareholder agreements are legitimately accepted. The freedom to support as individuals gives us the freedom to choose our contractual terms, whether or not we enter into contracts and with whom we enter into a contract. It is precisely this freedom that is directly contradicted, contrary to a shareholders` pact that undermines its enforceability. This flexible position was recognized by the Supreme Court in 2012 in Vodafone4, as part of the Company Act 1956.

The Tribunal found that the SHA is essentially a contract between some or all other shareholders of a corporation whose purpose is to confer rights and to give obligations under the Corporations Act. The Tribunal found that the SHA was a private document linking the parties, but not the other remaining shareholders or the company, which provides greater flexibility in resolving shareholder disputes and the nature of future capital contributions. Accordingly, the Tribunal stated verbatim that “this court (in V.B Rangaraj) considered that the provisions of the shareholder contract which provide for restrictions, even if they are compatible with corporate law, can only be authorized if they are included in the statutes, is (s) an opinion that we do not defend. (As a result), shareholders may enter into an agreement in the best interests of the company, but the only thing is that the provisions of the SHA do not violate the AoA. The main objective of the SHA is to take steps to ensure proper and effective internal management of the company. It can visualize the best interest of the company for different subjects, and also find different ways, not only for the good of the shareholders, but also for the company. In the case above Delhi High Court found that shareholders by an agreement (SHA) were prohibited from any other transaction that is not related to the company. This clause was not included in the company`s AOA and the respondent company stated that they could not be required to do so. Accordingly, the court stated that “the SHA in question is not contrary to the AoA or the Companies Act and has therefore found that the SHA is enforceable, even if it is not mentioned in the company`s AoA. However, if the shareholders explicitly challenged the articles at the time of the handover and the dispute relates to changes to the significant rights or obligations of shareholders – such as the filing period, the amount of the deposit capital or the distribution of profits – the amendments contained in the articles are null and clear and the agreement should be respected.