Shareholders' Agreement - Registration

Registration

In most countries, registration of a shareholders' agreement is not required for it to be effective. Indeed, it is the perceived greater flexibility of contract law over corporate law that provides much of the raison d'être for shareholders' agreements.

This flexibility, however, can give rise to conflicts between a shareholders' agreement and the constitutional documents of a company. Although laws differ across countries, in general most conflicts are resolved as follows:

• as against outside parties, only the constitutional documents regulate the company's powers and proceedings.
• as between the company and its shareholders, a breach of the shareholders' agreement which does not breach the constitutional documents will still be a valid corporate act, but it may sound in damages against the party who breaches the agreement.
• as between the company and its shareholders, a breach of the constitutional documents which does not breach the shareholders' agreement will nonetheless usually be an invalid corporate act.
• characteristically, courts will not grant an injunction or award specific performance in relation to a shareholders' agreement where to do so would be inconsistent with the company's constitutional documents.