Damages For Breach Of Shareholders Agreement

Parts of the Spanish doctrine and case law argue that if the contract was signed by each partner, the contract is also applicable to the company. Thus, all contractual acts of the company (for example. B the adoption of a social agreement adopted without the strengthened majorities provided for by the private partnership contract) could be challenged. The shareholders` pact is a legal contract that protects the rights and defines the obligations and responsibilities of all those who hold shares in the company. Shareholders` rights include, in addition to ownership, the ability to vote and transfer ownership, as well as the right to dividends. While these acts are sometimes found to be valid when other shareholders can prove that the complaint caused them a loss, they may invoke a breach of contract against the instigator of the offensive act. One of the most common methods of proving a lawsuit caused a loss to a shareholder by arguing that it resulted in a depreciation of the shareholders` shares. In this case, several measures can be taken if the measure is contrary to the agreement, including the suspension of the voting rights of aggrieved shareholders or the recovery of damages to the party or the aggrieved parties. In extreme cases, this may even give rise to a court injunction requiring the defaulting shareholder to obtain an action such as the transfer of his shares.

Uninjured shareholders may receive financial compensation to compensate for the damage caused by the breach of the shareholders` pact. Another remedy is to nullify the consequences of the infringement – for example, to remove the result obtained from non-compliance with the voting requirements set out in the shareholders` pact. If the infringement is not relevant, non-injurious shareholders also have the option of terminating the contract and signing a new contract among non-injurious shareholders. The question of whether a mandatory transfer clause in a shareholders` agreement constituted a sanction was considered in Pioneer Energy Holdings Pty Ltd [2013] NSWSC 1134 (Pioneer). Here, a mandatory transfer clause of the non-failing party gave the opportunity to acquire all the shares of the defaulting party for $1. The failing party paid $13 million for the shares. A shareholders` pact is an agreement that imposes the nature of the relationship between two or more shareholders of a limited company. They are agreed between shareholders and, as a rule, the company and may cover topics such as restrictions on the sale of shares, restrictions on the issuance of new shares or the rights of shareholders to appoint a director of the company. They are important because they have clearly stated the ownership and voting rights of shareholders in terms of decision-making. These agreements complement the statutes, but are often more detailed on the specific relationships between shareholders. This guide will determine what will happen if such an agreement is violated and the consequences of such an offence. Apart from awarding damages, the most common remedy for the settlement of a breach of contract is an injunction that is served by a court.

However, this can be a slow process and may result in additional costs. These orders may require shareholders to take the necessary voting steps to comply with the conditions set by the court, or even to compel a shareholder guilty of misconduct to transfer their shares. Although the right of sanction limits the principle of contractual freedom and limits the parties` freedom to pay rights and undertakings themselves as a result of an offence, the courts have considered it necessary not to enforce « punitive clauses » in order not to make effective contractual provisions leading to unacceptable results.