Validity Of Shareholder Agreement

Overall, therefore, it can be inferred that Vodafone is the only direct, legally and logically sound position in this case with respect to the validity of Type 2 SHA. However, since the observation is qualified only as obiter, it has only a convincing value. Therefore, there is no binding case that constitutes a relevant legal situation on this issue in the Indian context. The statutes are a legal contract between the shareholders and the company. Articles tend to engage each member of the company, although there is no individual contract between members. A private agreement between two or more members of a limited company would apply. A violation of SHA that does not comply with the statutes is a valid business deed, but aggrieved parties may obtain recourse under common soil law for any violation of this agreement. However, this argument, which I have just made about Rangaraj`s limited scope, was also advanced by the petitioner`s lawyer in the following case of the IL-FS Trust. Il-FS Trust involved a public company. Shareholders and the company participated in a Type 2 SHA. Subsequently, the proponents of the project agreed that the other part of the SHA would not leave the board until the SHA remained operational. This clause was not included in the company`s AOA. Subsequently, the second respondent resigned and opposed the SHA.

The question of the validity of such a clause, outside the AoA, arose. 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. In the case of a limited company, if the terms of the shareholders` pact do not violate the provisions of the Companies Act and the statutes, it would apply to members. However, no obligation can be imposed on the legal powers of the company. In a business case[1], the question of the legality of Type 1 SHA was examined. With the exception of VB Rangaraj v. V.B. Gopalakrishnan (`Rangaraj`) examined the issue of the applicability of Type 1 SHA by discussing only (a) what constitutes limiting the portability of shares, and (b) whether the imposition of such a restriction is permitted by the Companies Act, 2013 (or the previous legislation of 1956) and, if so, what is the extent of that admissibility. However, both of these cases considered these two issues in light of the Position established in Rangaraj that any provision of a SHA contrary to the AoA or the Corporations Act is null and void. Therefore, the argument used in these cases other than Rangaraj with respect to the validity of Type 1 SHA would not apply to the determination of the legality of Type 2 SHA in India.

This is because the barrier to the validity or opposability of the two types of HSIS is different. I will approach this point later in this article. 5) Defining the rights and obligations of each shareholder to the company. Shareholder agreements often cover a number of matters that are not fully addressed in a standard constitution, including: in the scenario in which the entity is itself a party to the shareholders` pact, the agreement can be applied to the company in accordance with the principles of the contract.