Shareholder Agreements in Hawai'i

The provisions of the statutory shareholder agreement substitute in for the legal obligations imposed by corporate law. Therefore, officers and directors violating the governance requirements of a shareholders’ agreement may be subject to ultra vires or breach of fiduciary duty claims and to the mandamus power of the courts, as opposed to being merely liable for breach of contract. However, the operation of the shareholder agreement may not be used to impose personal liability on a shareholder for corporate acts, where such liability would not otherwise exist.

The statutory shareholder agreement must be made unanimously by all shareholders at the time of the agreement and recorded in writing either in the certificate of formation or in bylaws approved by all shareholders or in a separate written agreement that is signed by every shareholder and is made known to the corporation. The shareholder agreement may only be amended by vote or agreement of all the shareholders at the time of the amendment (unless the initial agreement provides otherwise). All shareholders’ agreements in effect prior to September 1, 2015 are subject to a ten-year expiration, unless a different period was specified in the agreement. All agreements entered into after September 1, 2015 are not subject to any automatic term or duration, except where the agreement contains such a provision. Section 21.103 requires conspicuous notices of the existence of the shareholder agreement to appear on the front and back of the share certificate. Failure to comply with the notice provisions does not affect the validity or enforceability of the agreement itself, but a purchaser who does not have knowledge of the existence of the shareholder agreement may rescind the purchase if the corporation fails to comply with the notice provisions—provided that the action to enforce the right of rescission is commenced not later than the 90th day after discovering the existence of the agreement or 2 years after the purchase.

Implied-In-Fact Shareholder Agreement

Texas law recognizes contracts that are expressly made, either in writing or orally, and those that arise by implication from the actions of the parties and facts and circumstances evidencing an intent to form a contract. "Our courts have recognized that the real difference between express contracts and those implied in fact is in the character and manner of proof required to establish them." The terms of an implied shareholder agreement are determined from all the surrounding circumstances, including the statements and conduct of the parties, industry customs and standards, course of dealing, etc. For example, if all the shareholders understood from the outset of the enterprise that all the shareholders would participate and have a voice in management, that all would be employed by the corporation so long as they owned their stock, and that all profits would be fairly distributed by means of increases in salary and bonuses, then these mutual expectations would become contractual rights and interests incident to stock ownership, just as if they were expressly provided for in a written shareholder agreement.

The most common agreements, express or implied, that become problematic in shareholder oppression scenarios are an agreement that all shareholders will participate in management and/or an agreement that all shareholders will be employed by the corporation. The agreement of employment presents extremely difficult issues and is dealt with separately. Other agreements, such as participation in management, sharing and payment of profits, limitations on personal benefits and salary are generally enforceable.

The Non-Statutory Shareholder Agreement

Section 21.101 of the Code provides that the provisions governing the statutory shareholder agreement do not prohibit or impair any other agreement between two or more shareholders or between the corporation and one or more of its shareholders. Such a non-statutory shareholder agreement would be valid or invalid based on ordinary principals of contract law and would be subject to challenge if their terms were inconsistent with the ordinary corporate law. Likewise, even unanimous agreements that do not comply with section 21.101 are likely to be unenforceable to the extent that they constrain the exercise of discretion by the board of directors.

The question will always be one of proof. Was the shareholder agreement made and sufficiently definite in its terms to be enforced? Even under the shareholder oppression doctrine, courts rarely held that merely making the same compensation or election of directors decisions repeatedly, even over extended periods of time, established an agreement to continue to do so regardless of circumstances.