Significance of Shareholders’ Agreement &its Enforceability in India: A Critical Study

Abstract

Apart from the constitutional documents of the company namely the Articles of Association (A.O.A.) and the Memorandum of Association (M.O.A.); the Shareholders’ Agreement (S.H.A.) is another document that plays a vital role in establishing the relationship among the shareholders themselves and also between the shareholders and the company. S.H.A. is a reassertion of ‘contractualism’ in corporate law. However, even after being a valid contract, the terms of S.H.A. can only apply on the company if they are in consonance with the terms of A.O.A. This paper will focus on understanding the intricacies attached with Shareholders’ Agreement and why does entering into such an agreement has become a usual business practiseeven when there is no proper legislation or guideline governing the same. It will also focus on the impact of 2018 amendment in Specific Relief Act 1963 on the enforceability of S.H.A. upon companies.  This paper has tried to discuss the important judicial pronouncements relating to the Shareholders’ Agreement in India and how the concept has developed over the period of time in our country.