Share Transfer Restrictions: Enforceability of the Provisions of a Shareholder Agreement vis-à-vis the Articles of Association

  • Sunidhi Agrahari
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  • Sunidhi Agrahari

    Student at Jindal Global Law School, India.

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The question of enforceability of the provisions of a shareholder agreement (“SHA”) vis-à-vis the Articles of Association (“AoA”) is a perplexing one. The Companies Act, 2013 (“the Act”) provides that an AoA of a company, containing the guidelines of the internal regulations of the company, governs and binds all members of that company, including the directors and the shareholders. On the other hand, an SHA is an agreement entered into by the shareholders of a company in accordance with the Indian Contract Act, 1872, which levies additional rights and obligations (apart from those prescribed in the Act) upon the shareholders that are party to the said agreement. The company itself can be a party to this agreement. Since these agreements have acquired popularity only over the last two decades, the Indian judiciary has not got many opportunities to decide upon the enforceability of the provisions of such agreements if such provisions lie in conflict with the provisions of the AoA. Further, it is an arduous task to draw common strands in the ratios of the few cases that have dealt with this matter to present clarity for parties that enter into such agreements. However, the case of V.B. Rangaraj v. V.B. Gopalakrishnan is a landmark judgement, considered to be the guiding light in the context of this matter. In this paper, the author will explore the developments in jurisprudence pertaining to this matter and elucidate certain extant conundrums in law.




International Journal of Law Management and Humanities, Volume 5, Issue 1, Page 2168 - 2175


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