What does a shareholders agreement bind?
A shareholders agreement binds the shareholders who sign it. It can record how they vote, who is offered shares first, and how a shareholder leaves. It does not replace the articles, and it does not override the Companies Act.
Only the shareholders who sign it are parties. The company is bound by a term when that term is in the articles, or when the company itself signs and the term is one the Act allows.
What does it bind?
The parties. Typical terms are a right of first offer, a tag-along or drag-along among those parties, board seats they will vote for, and what happens if a shareholder dies or wants to sell. Those promises are enforceable between the people who signed. Who a shareholder is, is on the shareholder page.
When do the articles matter?
A private company restricts transfers in its articles. A first offer to existing members works against the company when the articles say so. How the instrument of transfer is completed is on the transfer page. Putting the same term only in the shareholders agreement binds the signatories. It does not, by itself, make the company refuse a registration that the articles would allow.
What does it not do?
It does not incorporate the company. It does not set authorised capital. That sits in the memorandum. The articles are on the articles page. This page is not a template.
Frequently asked questions
Four questions cover the company, the Act, a transfer, and the memorandum.
Does the agreement bind the company?
Only the shareholders who sign it are parties. The company is bound by a term when that term is in the articles, or when the company itself signs and the term is one the Act allows.
Can it override the Act?
No. A clause that contradicts the Companies Act does not win. The articles and the agreement sit under the Act.
Does it transfer the shares by itself?
No. A transfer is still Form SH-4, stamped under state law and delivered to the company. The agreement can say who must be offered the shares first.
Is it the memorandum?
No. The memorandum states the objects and the authorised capital. The shareholders agreement is a contract among the shareholders.
Sources
A shareholders agreement is a contract. The company is governed by its memorandum, its articles, and the Companies Act, 2013. A transfer of shares is section 56.