Shareholders Agreement Enforceability

Non-competition clause: this clause aims to prevent existing shareholder transactions similar to those of the company. Therefore, the SHA describes the rights, obligations of shareholders and provisions relating to the management and authorities of the company. The purpose of this Agreement is to protect the interests of shareholders; That is, those who hold less than half of the company`s equity. Mr. Shelmerdine was a shareholder of Guest Services Worldwide Ltd and also followed it as a consultant. His consulting contract, which contained restrictive agreements, expired in 2017. It continued to provide services to GSW until February 2019, but did not enter into a new consulting contract. In this case, an agreement was reached between two shareholders of a private company and an external one for the allocation of new shares of the company. The company was not a party to the above-mentioned agreement and its terms were not included in the company`s articles of association. The company was then transformed into a public limited company and its articles of association were amended. However, the articles still did not reflect the terms of the agreement. In accordance with the terms of the agreement, the allocation of shares externally should take place.

However, the Supreme Court excluded the outsider in question from imposing the award, since he was not a shareholder of the company at the time of the execution of the above-mentioned agreement and was also not a party to the agreement. It should be noted that the judgment in no way established that the transfer of shares agreed between shareholders between shareholders did not bind them. In Vodafone International Holdings vs. Union of India and another[5], Vodafone International Holdings, entered into transactions with Hutchinson Telecommunication International Limited, which transferred the share capital of Cayman`s subsidiary of Hutchinson Telecommunication International Limited from Hutchinson Telecommunication International Limited to Vodafone International Holdings. Vodafone International Holdings has acquired 67% of Hutch Essar Limited, a joint venture between Hutchinson and Essar. The Supreme Court has ruled that the company`s shareholders may enter into agreements that are in the best interests of the company, and if such provisions of the SHA are not contrary to the provisions of the ESA, those clauses of the agreements are valid and enforceable. As a general rule, a shareholder with a non-dominant stake, that is: Minority shareholder, unable to negotiate a provision allowing him to prevent a liquidation or sale. However, sometimes transactions require unanimous agreement for the sale, as stipulated in the agreement or elsewhere. In this case, a majority shareholder`s right to tow replaces the relevant agreements and allows him to impose the sale of the business. V.B.Rangaraj v. V.B Gopalakrishnan was the first case opened before the Supreme Court under the shareholder agreement.

The defendant is a limited liability company which, from the outset, has had a total of 50 shareholdings. Before the joint family of the applicant and the defendant gave the 50 shares of the company, the family was a minority investor with 13 shares, the remaining 37 shares being held by outsiders. Over time, the family purchased the remaining 37 shares and became the sole shareholder of the organization. The family consisted of Baluswamy Naidu and Guruviah Naidu, who were siblings, and each of the siblings had 25 shares in the organization. Plaintiffs and defendants 1 and 2 and a Selvaraj are the children of Baluswamy Naidu and defendants 4 to 6 are the children of Guruviah Naidu. Baluswamy Naidu entered the bucket on February 5, 1963, and Guruviah Naidu died on January 10, 1970. The applicants claimed that in 1951 there was an oral agreement between Baluswamy Naidu and Guruviah Naidu, that each of the branches of the family would continue to hold reliably the same number of shares, namely 25, and that if part of the two branches wished to offer its shares, it would give the persons in that branch the primary choice of purchase and only if the offer thus made was not recognised. the offers would be sold to others….