The court ruled that it was a tacit clause in the shareholders` pact that the other founders were not allowed to choose as directors to remove the plaintiff according to the articles. A contractor has the right to consider that the other parties were not voluntarily edging the effect of the agreement. If its contradictory position means that a director`s agreement on a procedure may well result in a breach of the obligation to retain the company, it may be partially protected if the shareholders ratify the decision. Ratification may exempt the director from liability to the company for breach of its obligations. Most directors` decisions can be ratified by shareholders, provided they are not ultra vires the incorporation of the company, that they do not involve fraud against minority shareholders or misappropriation of ownership of the company in bad faith, provided the company is not insolvent. Ratification should only be used for specific decisions – it should not attempt to offer a general absolution to directors in other circumstances. We appreciate the participation of controlling shareholders in decision-making A recent case before the High Court concerning a conflict between the shareholders` pact and the statutes, analyzes the position of the parties to a shareholders` pact, who are also managers of the company and are therefore subject to fiduciary and other obligations that are due to the company. Shareholder conflicts of interest arise as a Tier III conflict when shareholder interests are not properly balanced or harmonized. Shareholders appoint board members, usually prominent individuals, based on their knowledge and skills and their ability to make good decisions. Once a board of directors is formed, its members must face conflicts of interest between shareholders and the company, between different groups of shareholders and within the same group of shareholders. If the main task of a board of directors is to deal with a particular group of shareholders, all rational and high-level decisions are aimed at favouring that particular group and the concerns of other stakeholders cannot be recognized.
Board members must approach all conflicts responsibly and weigh the interests of all parties involved in a contemplative and proactive manner, the report says. On behalf of the other findings, it was argued that they had not acted voluntarily: they would have had no choice but to fulfill their fiduciary duties. Certainly, the judge recognized that it would be difficult to reach an agreement that prevents directors from acting on their fiduciary duty. But there is a principle that if an obligation – as part of what has been agreed – can be fulfilled in another way, one of which is legal and the other not, enforcement can be ordered by legal means. The other findings could have avoided their fiduciary difficulties by inciting the Cayman Company to sanction the infringement, amend articles or instruct the board not to remove the applicant. These were the measures they had to take under another insurance clause in the agreement, under which the parties agreed to take reasonably necessary steps to implement the agreement. It was therefore the court`s turn to declare that they could not remove the complainant under the articles, and – if they insisted that it engage them – they had a choice between what could be taken to resolve the problem. The employment status of a shareholder director gives it additional influence over inactive owners.
If other shareholders object or complain, they may be at risk of significant disruption and costs by conducting a labour dispute before an employment tribunal.