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Is shareholders' agreement amending company's constitutional documents legally enforceable? if not, what is it real value?

Jersey City, NJ |

The above assumption based on the below quote from http://en.wikipedia.org/wiki/Shareholders'_agreement

which states:

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.

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Attorney answers 4

Best Answer
Posted

You ask an excellent question but fail to give any context as to what is in the Shareholder Agreement that's inconsistent with the Articles of Incorporation. Whether the S/H Agreement is consistent or inconsistent or in fact an elaboration is itself an interpretative issue. Normally you an think of the Artilces of Incorporation as being a skeleton and a S/H Agreement as adding meat to the bones...but is connected and not distinct. Accordingly, my viewis that a S/Hagreement supplements NOT amends the Articles of Incorporation which can only occur with the filing of an Amended Articles of
Incorporation.

My answer is not intended to be giving legal advice and this topic can be a complex area where the advice of a licensed attorney in your State should be obtained. Please click "helpful" or "best answer" if my answer added any value or add a "comment" if you have more info for me to help you get a better answer.

Posted

By constitutional documents, I assume you mean the Articles of Incorporation and By-Laws. If all the shareholders enter into an agreement to amend the By-Lawys or Articles, the Courts can enforce the agreement and the By-Laws and Articles can be amended by Court Order. If only some of the shareholders enter into an agreement, the Courts may or may not enforce it. The Courts would have to consider all the shareholders and their rights before enforcing any agreement.

Posted

I agree with my colleague, Attorney Carasso. Look at the articles of incorporation and see if there is a specific process laid out for amending the bylaws and articles, and then determine if they followed them. If you believe that they didn't then I would suggest seeing an attorney to review what your legal alternatives are.

I am licensed in New Mexico and Pennsylvania, and therefore any discussion of issues related to other states must considered within that context. In addition, my comments are not intended to create a legal representation but merely to respond to the limited facts presented by the question. Any opinion herein is not meant as a precise statement of legal rights or as a recommendation of any particular course of action. A more complete legal review can be obtained through local counsel.

Posted

I agree with both of my colleagues. You have to read the articles of incorporation and bylaws to make a determination as to whether it was done properly. However, shareholders can always agree to amend them.

Attorney answers to questions are for general purposes only and do not establish an attorney-client relationship. There are always specific facts that are important for an attorney to review before providing advice to a Client. In no way should you rely on the response provided herein to conduct your legal affairs on your own. You should always hire an attorney before you rely on advice provided.

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