Analysing Shareholders Agreement Encompassing Restrictions on Free Transferability of Shares and their Enforceability with regards to the Articles of Association

The Shareholders of a Company enter into a consensual agreement through the Shareholders Agreement pertaining to internal management of the Company and transfer of shares. The enforceability of the Shareholders Agreement depends on the charter documents of the company, especially the Articles of Association. While the enforcement of a Shareholders Agreement may seem like an enforcement of any other contractual agreement, such is not the case. It is commonly observed that the SHAs contain provisions that the AoA does not address. Additionally, SHAs represents the mutual understanding of shareholders and detail provisions for share transferability that they AoA may be silent upon. The friction between the AoA and SHAs results is witnessed by the Courts wherein the enforceability of the SHA is disputed. This paper demonstrates the judicial trends pertaining to the conflict in India and suggests the way forward in dealing with such disputes.