Based on their wide usage, shareholders’ agreements (“SHAs”) are of great importance in the sphere of corporate law practice. Their popularity is based on the elasticity they grant to shareholders in order to regulate their relations among each other and with a company. Considering this importance, we shall first analyze the legal relationship formed under SHAs and their effects at the corporate level. Finally, we shall look at the consequences of breaching SHAs.
In General
SHAs are agreements executed by the shareholders of a company, or those aiming to hold shares in a company, whose purpose is to regulate their relationship with each other, the company, and especially the structural and procedural order to be applied within the company. In terms of their usage in legal practice, SHAs provide a level of elasticity that cannot be obtained via the articles of association, and assure confidentiality among shareholders.
SHAs are binding and subject to the freedom of contract under the law of obligations. They impose on shareholders an obligation to exercise their rights arising out of shareholding status in conformity with the realization of the objectives set forth under the SHA1.
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