The main reason for the use of a shareholders` pact is that it is a private document between the parties, which may be subject to explicit restrictions on confidentiality. On the other hand, the statutes are a public document that is available to the register offices of companies. This makes statutes an inappropriate way to deal with issues such as . B directors` compensation or other sensitive internal management issues. Q. How can I protect the family and other shareholders if I die? While a director is entitled to all information relating to the company`s activities because of his duties as a director, he will subordinate this information to his fiduciary obligations, which involve the obligation not to use this information to the detriment of the company. In addition, under the Corporate Act, a non-executive shareholder has very limited rights to obtain information that, to simplify, is not much more than a right to receive accounts to be submitted to the general meeting for approval. It is therefore important, especially for minority shareholders, to open up a right to information about commercial activity. This can be formulated either as a right to receive specific information (for example. B monthly/quarterly administrative accounts, cash flow forecasts, annual budgets, etc.), or as a broader right to receive information about the behaviour of companies that such a shareholder can reasonably demand. In some cases, particularly where the minority shareholder is an investor, when a shareholder is not informed, he may have the right to enter the company`s commercial premises, obtain and copy records, interview employees and appoint consultants on his behalf to investigate and report on the company`s conduct.
The statutes are a fundamental constitutional document of each company. Legally, the statutes automatically bind the company and its members (Section 25 Companies Act, 1963), although members are bound by the statutes only as partners and not as partners. In addition to limiting the company`s executive powers or setting shareholder voting rights, there are other crucial issues that can be addressed in a shareholders` pact as follows: According to the article in Table A and, in fact, most standard statutes, dividends are recommended by directors and approved by shareholders at the general meeting. Intermediate dividends are recommended and paid by directors and approved by shareholders at the general meeting. In this regard, it is important not to pay dividends in both cases, unless the Board of Directors first recommends the distribution of a dividend. In the absence of evidence of false openings on the part of the Board of Directors, it is extremely difficult, if not impossible, for a minority shareholder to insist on the payment of dividends. Therefore, it is customary to include in a shareholders` pact a provision that a certain amount of a company`s profits must be declared and paid annually in the form of a dividend. Often, in start-up companies, the application of this clause is suspended for a period of time in order to allow the company to reach a position in which it obtains a certain level of profit or uses profits retained for development/expansion. When setting up a company, if no statute is submitted to the Office of the Register of Companies, one of the incorratory sections of Part I or II of Table A of the First Act on Companies will automatically constitute the statutes of the newly created company.