This document includes a clause which can be inserted into a shareholders’ agreement. This clause dictates which decisions of the company must be made by a vote of the board.

It is common in shareholders’ agreements to set out details about the role and scope of decision making of the board. This is because, in many instances, the shareholders negotiating these agreements have the right to sit on the board of the company themselves or nominate a representative to the board (or both).

Once appointed as a director to the board, the role of the shareholder (or his or her representative) is to make decisions in the best interests of the relevant company and not the shareholder.

When including the scope of decision making of the board in shareholders’ agreements, it is important to ensure that the terms contained in the agreement do not contradict or conflict with the scope of decision making of the board in the constitution of the company. Therefore, when drafting these clauses, practitioners should ensure they are familiar with the constitution of the relevant company.

Using this precedent

This is a general clause which can be used in a shareholders’ agreement.

When inserting this optional clause into an agreement, care must be taken to ensure that the agreement remains consistent. Cross-references, definitions and schedules should all be checked.

This document has been authored for LexisNexis by Elise Margow, Principal, Legally Speaking.

This document is prepared with the assistance of Specialist Editor Stephen Newman, Executive Counsel, Ponte Earle.