Are Directors Bound by Shareholders Agreement

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Are Directors Bound by Shareholders Agreement

As a director of a company, one may wonder whether they are bound by the shareholders` agreement. In simple terms, a shareholders` agreement is a legally binding contract between shareholders of a company, outlining the rights and obligations of each shareholder, as well as the rules and regulations governing the management and operation of the company.

The agreement is typically entered into by all shareholders, including directors, and it outlines the terms and conditions that govern their relationship. This may include issues such as the appointment and removal of directors, the distribution of profits, and the procedures for resolving disputes between the shareholders.

In most cases, directors are bound by the shareholders` agreement and are required to comply with its terms and conditions. However, it is important to note that the agreement cannot override the company`s articles of association or the law.

The articles of association are the governing document of a company, setting out the company`s internal management structure, rules, and procedures. The articles of association supersede any shareholders` agreement, and directors must abide by them at all times.

Furthermore, directors are also subject to the law, and their actions must comply with the Companies Act 2006 and other relevant legislation. For example, directors have a duty to act in the best interests of the company, to exercise reasonable care and skill, and to avoid conflicts of interest. These duties cannot be overridden by a shareholders` agreement.

In summary, while directors are typically bound by the shareholders` agreement, this agreement is subservient to the company`s articles of association and the law. Directors must ensure that their actions comply with these legal requirements and duties, even if these are not explicitly stated in the shareholders` agreement.

In conclusion, as a director of a company, it is crucial to understand the relationship between the shareholders` agreement, articles of association, and the law. While the shareholders` agreement may define the terms of your relationship with the shareholders, it is important to ensure that your actions as a director comply with the company`s articles of association and legal requirements.

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