David Pisarra

Enforceability Of Voting Agreements

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Enforceability Of Voting Agreements

On December 7, 2020, Posted by , With No Comments

The agreement should be mentioned prominently on the certificate; Otherwise, the contract cannot be obtained in value against an acquirer who buys the stock without knowledge of the agreement. However, a person who receives the fund by donation or estate is bound by the agreement as soon as he or she is aware of it. It is important to note that these voting agreements are only valid between shareholders with respect to shareholder votes. They are illegal between directors and should not be used by shareholders to limit the exercise of discretionary action by directors. Moreover, such agreements cannot be applicable if they constitute a simple purchase of votes. It turns out that this view is wrong. I show that about 15 per cent of the companies that have gone public in the last six years have done so subject to a shareholders` pact. Shareholders are using these agreements to largely transform their rights. They are used, penetrating, to shrink on the composition of the board of directors. The vast majority of agreements confer appointment rights on certain shareholders, and more than half of them contain a contract to specifically coordinate certain or all parties to an agreement. The agreements are also used to enter into contracts between the shareholders and the company itself.

In a significant minority of agreements, the company grants vetoes to certain shareholders over important company decisions, such as mergers, CEO layoffs or changing business lines. Other agreements waive the doctrine of enterprise opportunity, limit the portability of shares in a variety of possibilities, or mandate arbitrations of claims. Most worrying is that, in most agreements, the company commits to indefinitely supporting certain candidates on the shareholder`s board of directors by listing candidates and using its best efforts to select candidates. The content of these agreements therefore departs, in several respects, from what we also know about the company`s partner contracts. Shareholders have a fundamental right to vote that cannot be compromised or violated by creation or by control entities. However, the law allows a shareholder to restrict or change his or her right to vote by agreement. First, I explain the specific legal role of shareholder agreements. The legal law of companies gives the board of directors authority over corporate affairs and justifies this power by electing shareholders by the board of directors. This legal system makes the election of the board of directors a function of shareholder choice.

Even the most flexible delay rules in the law, such as class voting rights, are linked to shareholder voting rights. Nevertheless, shareholders can and do on their votes and other control rights. What for? Why use a treaty to shape control rather than the more familiar instruments of corporate law – the Charter and the Statutes? A voting agreement is an agreement between shareholders to choose their shares in a certain way.

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