Delaware Corporation Shareholders Agreement Example

1. A shareholders` agreement may restrict the right of the parties to elect and dismiss members of the management of the undertaking. Klaassen v. Allegro Development Corp., C.A. No. 8626-VCL (October 11, 2013). The shareholders` agreement in Schröder contained a provision on the composition of the board of directors, which required all shareholders to choose three members of the ordinary shareholders, one of whom was the COMPANY`s CEO. The majority of common shareholders reported a new interpretation that this provision allowed them to choose the CEO of the company. The complainants read that common shareholders must choose the person who acts as CEO as one of their three board members.

In this case, an ambiguity between different sections of a shareholders` agreement was examined. One found that the shares of a deceased shareholder had been transformed into a non-voting economic interest. The second, a blocked provision, required the approval by the « majority shareholders » of an « important decision », approved by a less than unanimous vote of the board of directors. The agreement defined « majority shareholders » as « majority shareholders, without mentioning voting rights. Following the death of the majority shareholder, the Board of Directors adopted a restructuring proposal proposed by a majority minority shareholder. The estate administrator rejected the plan as self-negotiation, unfair and detrimental to the estate. In a legal action on the appointment of a receiver, the Court of Justice avoided resolving the ambiguity by approving the application. But this case highlights the need for careful scriven. Shareholder agreements are not required under Delaware General Corporation Law, but they are advised to certain start-ups, narrow or small businesses, where shareholders must describe in detail how the company should be managed and how shares should be transferred, shareholders who want anti-dilution rules and countless other scenarios. 8. The performance of a shareholders` agreement with the applicable law of Delaware is not sufficient to confer personal jurisdiction on a non-resident shareholder.

EBP Lifestyle Brands Holdings Inc. v. Boulbain, C.A. No. 2017-0269 -VCS (Del. Ch. Aug. 4, 2017) In Bonanno, the applicant was a party to numerous documents, including a shareholders` agreement including the legal choice in New York and exclusive jurisdiction selection clauses. After the plaintiff filed an action to set aside its actions in Delaware, the company argued that the parties had agreed to negotiate all claims in New York. The Court of Opportunity ruled that Section 115 did not alter Delaware`s public policy and cited the language in the summary of the law, which confirmed that The legislature did not intend « to prevent the application of a provision in a shareholders` agreement or other letter signed by the shareholder against which the provision is to be applied. » The court held that such a waiver had to be « remarkably clear. » Accordingly, an exclusive jurisdiction selection clause in a shareholders` agreement should be clear and broad enough for a Delaware company.