A share agreement is a legally binding contract that defines the rights, obligations and responsibilities of shareholders in a company. 

Significance of shareholder agreement.

Why should there be a shareholder agreement? 

A shareholder agreement is important to avoid any potential conflicts. This shareholder agreement allows shareholders to either agree or disagree with matters involving shareholders in a company.

Shareholders’ agreements are also important to protect the shareholders’ rights, either majority or minority.

Shareholders also can get the company’s information following the terms in the shareholders agreement. 

Shareholders’ agreement vs Companies Act 2016.

Can shareholders agreement supersede the statutory requirements in the Companies Act 2016? 

The answer is no. The shareholders’ agreement cannot supersede the statutory requirements that have been stated in the Companies Act 2016. However, shareholders can mutually agree in the shareholders’ agreement to do things beyond what has been stated in the Companies Act 2016. 

‘I have breached the shareholder agreement. What should I do? 

If you have breached the shareholder agreement, but you have not breached the provisions of the Companies Act 2016, you can still be sued by the other party and/or the company and the other party can claim damages for your breach.Get legal advice from lawyers to know what must you do.

Is a shareholder agreement without a stamp valid?

Shareholder agreement becomes legally binding upon the signatures of all involved parties, even if it is not stamped.. However, this non -stamped shareholder agreement cannot be presented as evidence in court until it is properly stamped.

Your business partner breached the shareholders’ agreement?

In the case of Hwa & Ors v Abdullah & Ors [2020] 9 MLJ 217, The first and the third plaintiffs had entered into a shareholders’ agreement with the first to fourth defendants to govern their relationship in a joint venture company. 

The sixth Defendant in this case is a company where the first to fourth defendants had transferred their shares to the sixth Defendant. The plaintiffs in the present case contended that the defendants had breached the shareholders’ agreement by disposing of a property held by a subsidiary of the company without the plaintiffs’ knowledge, allotting shares in the company as consideration for the purchase of the entire share capital of two other companies, causing a subsidiary of the company to engage in the dealing and offering of redeemable convertible preference shares of the sixth defendant without the plaintiffs’ knowledge, and transferring the shares in the company held by the first to  fourth defendants to the sixth defendant without the plaintiff’s consent and in breach of the rights of first refusal provided for under the shareholders’ agreement.  These breaches entitled the plaintiffs to enforce a buy-out clause contained in the shareholders’ agreement.

The court in this case allowed the Plaintiffs’ claim with costs. 

Do you need legal advice? 

Are you plagued by problems in your company? Need legal advice? Do you want to take the action to Court? Contact us to set up an appointment with our lawyers. Our lawyers are always ready to assist you.

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