2.4 Companies: Shareholder Considerations Flashcards
What are usually included in SAs to e.g. protect trade secrets, even after M leaves company
Restrictive covenants
What are veto provisions
Usually requires unanimous approval (e.g. to change AoA, instead of SR), or minority must vote in favour
When should company especially be party to SA
If positive Os on the company are included
Are SAs file at CH?
No - private
What happens if new Ms join the company
They will need to sign Deed of Adherence to be bound by SA
What is a Texas Shoot Out deadlock provision
Parties bid
Usual provision on pre-emption in SA
Right under 561 ‘copied’ to cover ALL new shares (not just equity securities)
What is a Russian Roulette deadlock provision
One M offers to the other, at their price, to buy or to sell, which other M must accept
Two ways a deadlock provision can be written into SA
Russian Roulette or Mexican/Texas Shootout
What is the effect of veto provisions
Reduces the effect of majority rule
Can the provisions of SA be breached to follow CA?
Yes
Ms can freely contract against CA, but C should be excluded from that part of agreement void/part severed (CASE)
Russell v Northern Bank Development
What must RCs in SA be to avoid being void
Reasonably protect the legit business interest of the company - any further and void
Usual provision in SA on termination
By default (material breach of SA) or consent
What happens if M breaches SA
M has remedies for BoC directly against M
How do SAs apply to Ms
In their personal capacities
What happens if C is included in part of SA which is against CA provisions
Void provision, or if it can’t be severed, void agreement
Can SA provisions be against CA?
Yes
What is the usual way M has to bring an action against another M (for breach of AoA)
Through the company
Who should be party to SA (bar Ms)
C, but not to parts breaching CA
If company is party to SA, what should the recitals make clear
These are severable from other provisions
What do SA provisions depend on
The kind of business
Russell v Northern Bank Development ratio
Ms can freely contract against CA, but C should be excluded from that part of agreement void/part severed
Usual provision on financing in SA
SA often conditional on financing
What usually happens if there is conflict between SA and CA
SA expressly states that SA prevails
What provisions does SA usually contain (and especially if Ms each own 50%)
Deadlock provisions
Usual provision on quorum in SA
Provides that certain persons (e.g. minority M) must be present
Are shareholder agreements instead of AoA?
No - in addition
