2.4 Companies: Shareholder Considerations

Question 1

What are usually included in SAs to e.g. protect trade secrets, even after M leaves company

Answer 1

Restrictive covenants

Question 2

What are veto provisions

Answer 2

Usually requires unanimous approval (e.g. to change AoA, instead of SR), or minority must vote in favour

Question 3

When should company especially be party to SA

Answer 3

If positive Os on the company are included

Question 4

Are SAs file at CH?

Answer 4

No - private

Question 5

What happens if new Ms join the company

Answer 5

They will need to sign Deed of Adherence to be bound by SA

Question 6

What is a Texas Shoot Out deadlock provision

Answer 6

Parties bid

Question 7

Usual provision on pre-emption in SA

Answer 7

Right under 561 ‘copied’ to cover ALL new shares (not just equity securities)

Question 8

What is a Russian Roulette deadlock provision

Answer 8

One M offers to the other, at their price, to buy or to sell, which other M must accept

Question 9

Two ways a deadlock provision can be written into SA

Answer 9

Russian Roulette or Mexican/Texas Shootout

Question 10

What is the effect of veto provisions

Answer 10

Reduces the effect of majority rule

Question 11

Can the provisions of SA be breached to follow CA?

Answer 11

Yes

Question 12

Ms can freely contract against CA, but C should be excluded from that part of agreement void/part severed (CASE)

Answer 12

Russell v Northern Bank Development

Question 13

What must RCs in SA be to avoid being void

Answer 13

Reasonably protect the legit business interest of the company - any further and void

Question 14

Usual provision in SA on termination

Answer 14

By default (material breach of SA) or consent

Question 15

What happens if M breaches SA

Answer 15

M has remedies for BoC directly against M

Question 16

How do SAs apply to Ms

Answer 16

In their personal capacities

Question 17

What happens if C is included in part of SA which is against CA provisions

Answer 17

Void provision, or if it can’t be severed, void agreement

Question 18

Can SA provisions be against CA?

Answer 18

Yes

Question 19

What is the usual way M has to bring an action against another M (for breach of AoA)

Answer 19

Through the company

Question 20

Who should be party to SA (bar Ms)

Answer 20

C, but not to parts breaching CA

Question 21

If company is party to SA, what should the recitals make clear

Answer 21

These are severable from other provisions

Question 22

What do SA provisions depend on

Answer 22

The kind of business

Question 23

Russell v Northern Bank Development ratio

Answer 23

Ms can freely contract against CA, but C should be excluded from that part of agreement void/part severed

Question 24

Usual provision on financing in SA

Answer 24

SA often conditional on financing

Question 25

What usually happens if there is conflict between SA and CA

Answer 25

SA expressly states that SA prevails

Question 26

What provisions does SA usually contain (and especially if Ms each own 50%)

Answer 26

Deadlock provisions

Question 27

Usual provision on quorum in SA

Answer 27

Provides that certain persons (e.g. minority M) must be present

Question 28

Are shareholder agreements instead of AoA?

Answer 28

No - in addition