1. A shareholders` pact may restrict the rights of the parties to the election and sale of directors. Klaassen v. Allegro Development Corp., C.A. No. 8626-VCL (Del. J.C. 11 Oct 2013). In corporate democracy, the standard system for electing directors votes, but shareholders can vote by contract. In private companies, shareholders routinely do so by using shareholder pacts – contracts between company owners – to negotiate directly directorships and other control rights. In recent years, litigation over these agreements has intensified in Delaware courts. In late 2019, the Delaware Supreme Court issued a controversial ruling on whether the parties to a shareholders` pact were jointly a majority shareholder and did not do so in this case. However, economists and lawyers have tended to ignore the various questions posed by shareholder agreements.

In a new article, I explore shareholder agreements conceptually, empirically and doctrinally and show how they raise profound questions about the architecture of corporate law. 3. Ordinary shareholders may agree, in a shareholders` pact, to waive their legal assessment rights. Manti Holdings, LLC. V. Authentix Acquisition Co., C.A. No 2017-0887-VCSG (Del. Ch, 12 October 2018) This explanatory and empirical presentation has normative implications for some of the most fundamental debates in corporate law. Thus, understanding shareholder agreements imposes two essential distinctions in corporate law: that control of the board of directors should be accompanied by fiduciary duties, while the exercise of contractual rights should not take place, and that shareholders negotiate discretionary “residual rights”, while other stakeholders, such as creditors, protect themselves contractually. The extensive use of contractual rights by shareholders requires us to review the type of control on both fronts. It also raises the fundamental normative question of whether it is desirable for shareholders to contractually redeploy exercise rights that are otherwise related to share ownership and the corporate charter.

Vice-Chancellor Laster noted that, to the extent that Section 141 (k) of the DGCL authorizes shareholders to remove directors without reason (with certain exceptions), conflicting restrictions in the shareholders` pact are binding only on the parties. As a signatory, the founder had waived his right to appoint and remove, without reason, non-classifying directors, unless provided for. Since the shareholders` pact allowed the revocation of board members following a change of CEO, it was able to remove external directors, but not replace them. However, since the Director General of the Estate was entitled to a seat on the Board of Directors, his dismissal was not valid. Schroeder`s shareholders` pact contained a provision relating to the composition of the board of directors, which required all shareholders to choose three owners of the common shareholders, one of whom was the CEO of the company. The majority of ordinary shareholders have made known the new interpretation that this provision allowed them to choose the CEO of the company.