What is difference between shareholders agreement and joint ventureareement
pervez (adviser) 06 August 2011
Big difference... not even correlated with each other... shareholders agreement deals with inter-se rights & obligation of the shareholders of a company [ unlisted], while joint venture agreement deals with agreement between the parties agreed to setup & carry on a new business having potential in the market...
anand das (service) 08 August 2011
Thank you very much Mr Parvez. I got the point. However, i have some queries regarding shareholders agreement.
1. Shareholders of every company have to enter into a shareholders agreement or only shareholders of of a joint venture company can enter into shareholders agreement ?
2. If all provisions are given in MOA& AOA then why to enter into a shareholders agreement ? Is it necessary ?
Is this a practice in other countries also ?
LLB.ACS Gourav Khatri (COMPANY SECRETARY) 10 August 2011
1. Shareholders of every company have to enter into a shareholders’ agreement or only shareholders of a joint venture company can enter into shareholders agreement?
b. Geographical presence of investee company/ barriers on investors company
c. Existing market presence of investee company
d. Financial arrangements – debt has high leverages thus equity infusion is treated as most convenient.
Is this a practice in other countries also?
It is a good question.
Thus a shareholders’ agreement has nothing to do with Memorandum of Association.
LLB.ACS Gourav Khatri (COMPANY SECRETARY) 18 May 2012
Courts have either refused to recognize clauses in shareholders agreements or, even when consistent with company legislation, enforced such clauses only if they have been incorporated in the articles of association of the company. There is a series of rulings in the respect in case of any conflict between the Articles and the SHA, the former will always prevail. Some of these are:
V.B. Rangaraj v. V.B. Gopalakrishnan (AIR 1992 SC 453)
Shanti Prasad Jain v. Kalinga Tubes Ltd., (35 Com. Cas. 351 SC)
Mafatlal Industries Ltd., v. Gujarat Gas Co. Ltd (97 Comp Cas 301 Guj),
Pushpa Katoch v. Manu Maharani Hotels Limited ( 131 Comp Cas 42 (Delhi)]
In Western Maharashtra Development Corporation Ltd. Vs. Bajaj Auto Ltd [(2010) 154 Company Cases 593 (Bom)], it was held that such clauses are to hamper the free transferability of shares and in violation of section 111A of the Companies Act, 1956 and hence, are not enforceable. However, the Supreme Court in 2003 in its decision in M.S. Madhusoodhanan v. Kerala Kaumudi Pvt. Ltd. (2003 117 CompCas 19 SC ) not disagreeing with the decision in V.B Rangaraj (Supra) but distinguishing itself from the facts in that judgment, held that a restriction in relation to identified members on identified shares of a private company did not amount to restriction of transferability of shares per se.
S Jadhav 98336 98330 (Jadhav & Associates) 23 May 2012
Was the query only for academic purposes or was the querist involved in a case relating to the query?
Dear S.Jadhav Ji,
I needed the above information in connection with prepartion of a Shareholders Agreement(S.A.). for my organization.
While preparing it , I saw that some specimen agreement contain a clause that in case of a conflict between the two,the provisions contained in the Shareholders Agreement shall prevail,which seemed to me not correct.
Moreover , I wanted to suggest to my management in connection with a proposal for a specific project ,whether they should go in for the S.A. or J.V. and for the said purpose, I desired to know the exact differences between the two.
So I raised these queries and got very satisfactory replies from Shri Gaurav Khatri ji, who was kind enough to help me in the matter.
S Jadhav 98336 98330 (Jadhav & Associates) 25 May 2012
Thank you Mr. Maitra. Please do not take offence as the query can be replied better if a little background is provided.
Gaurav has really explained well.