Ashutosh Pandey, PGD in Corporate Laws and Management from Indian Law Institute (B.A. L.LB Graduate, Lloyd Law College)
What is a Shareholders’ Agreement?
Shareholders Agreement (hereinafter SHA) is a private agreement amongst some or all of the Shareholders and often the Company itself, to create and confer rights and obligations that are bargained for in a deal, which are beyond yet consistent with the Companies Act, 2013. The SHAs are also utilised to contractually agree to those rights and obligations that relate to the management of the company, remuneration of the Directors and other such sensitive details that the Shareholders would want to contract for but would not want them to become public knowledge, therefore such clauses are penned in the SHAs instead of the Articles of Association (hereinafter AoA).
Barring the sensitive clauses the other clauses are usually replicated in the AoA as mandated by Courts1 for enforceability purposes, as in case of breach of a SHA we can ask for damages as per the provisions of the Contract while breach of AoA is breach of a statutorily mandated contract and thus giving better rights for enforcement.
