Comparative Study of  Enforcement of Shareholders' Agreements in Iranian and English Legal Systems

Sardoueinasab, Mohammad; Mehrabi, Mehrnaz

doi:10.22096/law.2021.120697.1620

Comparative Study of Enforcement of Shareholders' Agreements in Iranian and English Legal Systems

Document Type : Scientific Paper

Authors

Mohammad Sardoueinasab ¹

Mehrnaz Mehrabi ²

¹ Associate Professor, University of Tehran, Farabi Campus, Qom, Iran.

² Ph.D. Student, Tehran University Farabi Faculty, Qom, Iran.

10.22096/law.2021.120697.1620

Abstract

In order to complete provisions of Articles of Association and corporate bylaws, shareholders set up a series of ancillary agreements on the structure and operation of joint stock Company, such as agreements on management of the company, voting methods in general meetings, share transfer methods and the like. In comparison with corporate documents, shareholders side agreements own different characteristics and status in Joint Stock Companies. However, relevance and reciprocity of these documents in practice is undeniable.According to the general rule of Article 975 of Civil Code, in order for the agreements of the shareholders to be enforceable, their provisions must not violate mandatory rules relating contracts and commercial companies. Shareholders parties to the agreement or the joint stock company, if is a party to the agreement, can request fulfillment of the obligations arising from the agreements form the obligator. In addition to legal sanctions provided for breach of contractual obligations, shareholders may provide for additional contractual sanctions such as penalty clauses and liquidated damages, suspension of voting rights, or expulsion from the company. Due to the lack legal provisions in Iranian laws, shareholders are not obliged to disclose shareholder agreements before Company Registrar Office. Moreover, shareholder agreements cannot be invoked to the detriment of third parties such as non-agreement shareholders, company creditors or the government.

Keywords

Shareholders’ agreements

Enforcement

mandatory rules

third parties

Bibliography

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