Modification of the legal rights of shareholders: appointment of directors This analysis does not apply only to the rights associated with shares. It also applies to other matters for which the parties may have concluded a trade agreement, but for which the law sets a different standard position. Unless this standard position is changed in the memorandum and articles of association, it may confer on the parties an unintended and undesirable legal effect. Joint ventures often involve some commercial risk to the parties involved, whether it is the expected financial performance of the underlying company, the impact of adverse events in global financial markets on the company`s markets sector, or disagreements among shareholders about the future strategic direction of the joint venture. It is therefore crucial that shareholders in British Virgin Islands joint ventures take control of an area where they can determine events: by mitigating the prospect of a shareholder dispute due to conflicting contractual arrangements and by carefully planning tactics in the event of a dispute. There are various provisions on the transfer of shares (so-called “Russian roulette” and “Texas shooting” provisions) that can be included in the memorandum and articles and that would apply in the event of a blockade to allow one party to acquire the shares of BVI held by the other party. These provisions could be triggered by a deadlock at the level of the board of directors or shareholders and could only be formulated to operate if the shares are held by two shareholders at 50%. The practical advice is therefore the same: the memorandum and articles of association should clearly change the standard position set out in the law so that shareholders can avoid the prospect of litigation due to frustrated business intentions. However, these types of provisions can lead to an extreme result, as their exercise would potentially mean that one party buys the shares of the other party.
In some circumstances, this may not be economically viable (e.g. B if one of the parties does not have sufficient financial resources to acquire the shares of the other party, or if both shareholders provide the British Virgin Islands company with an invaluable asset or service that would no longer be available to the British Virgin Islands company once that party is no longer a shareholder). Once a condition sheet has been signed, the parties often attempt to draft and negotiate a shareholder agreement, which is most often subject to the laws of a large onshore jurisdiction such as England and Wales, New York or Hong Kong with respect to a BVI joint venture. Although the Shareholders` Agreement grants the parties rights and remedies as a contractual matter under applicable law, with respect to the most important legal aspects of the joint venture – from the constitution of the board of directors to shareholder matters – it is the memoranda and articles of association of BVI (the “Memoranda and Articles”) that are important from the perspective of Virgin Islands law. British. For parties to a shareholders` agreement where a British Virgin Islands company is the vehicle for the joint venture, this means that there are effectively two contracts (the merger and acquisition on the one hand and the shareholders` agreement on the other) parallel to each other, and the job is to ensure that they do not conflict with each other. The Court could therefore order the holding of a meeting of shareholders with a reduced quorum requirement, although it should be noted that, in order to grant that remedy, it is probably necessary to demonstrate frustrating behaviour on the part of the shareholder concerned, the implementation of which could take some time. As a general rule, in the event of a breach of the shareholders` agreement, recourse is for damages or an injunction is possible. Specific enforcement is somewhat rare in commercial contracts, as courts hate forcing the parties to come together. On the other hand, if there is a violation of the merger and acquisition, the thing that is supposed to be done would probably be invalid. This is a big difference between the merger and acquisition and the shareholders` agreement. The typical remedies mentioned above would also apply in this case, but there may be other remedies such as confiscation.
The flexibility of the law means that it is possible to include in the articles of association tailor-made provisions that reflect the commercial intentions of the shareholders. § 9 Abs. Paragraph 1 of the Act is relevant in that it provides that the agreement must specify the classes of shares that the company is entitled to issue and, if the company is entitled to issue two or more classes of shares, the rights, privileges, restrictions and conditions attached to each class of shares. The uncertainty arising from such a conflict may manifest itself not only in disputes between shareholders over the effectiveness of the measures allegedly taken against BVI (e.B. transfer of shares or appointment and dismissal of directors), but also in the nature of the remedies available to an aggrieved shareholder. Failure to align the provisions of the memorandum and articles with those of the shareholders` agreement may lead a shareholder to conclude that the scope of the remedies available to him is narrower than originally envisaged. The cumulative effect of these legal provisions is that in the event of a conflict between the provisions of (i) the memorandum and articles of association and (ii) the shareholders` agreement under British Virgin Islands company law, it is not always clear which provisions should prevail (notwithstanding the existence of a primacy clause commonly found in shareholders` agreements according to which the provisions of the shareholders` agreement prevail over the conflicting provisions). provisions of the memorandum or statutes). The parties enter into joint ventures and, in many cases, enter into shareholder agreements without fully understanding the consequences of their contractual arrangements.
Part of the problem is that the interaction between a company`s memorandum and articles of incorporation, on the one hand, and a shareholders` agreement, on the other, is sometimes a bit unclear. In some jurisdictions, this interaction is more or less onerous than in others. The purpose of this article is to examine this dynamic in the context of a British Virgin Islands company (“BVI”) and to shed light on what the parties must do and why they must do so when using a BVI vehicle and a BVI lawless shareholders` agreement for a joint venture. Thus, cane/Jones extended the Duomatic principle to the question of whether the shares of all shareholders are sufficient to effectively modify the merger and acquisition, and it is therefore clear that the decisions in these cases under English law undermine the decision in Scott v. Frank F. Scott to some extent, so that prior to the passage of the new Companies Act 2006 (UK), M&A, as they are available at Companies House in the UK, may not accurately reflect the full scope of mergers and acquisitions. Given that it is an economic reality that shareholders may attempt to withdraw from their investment if the business objectives of the joint venture have failed or if the relationship between shareholders has collapsed, the range of remedies available to shareholders of British Virgin Islands companies should be considered as attractive as the initial benefits of setting up a joint venture in the British Virgin Islands. This article examines how shareholders of a British Virgin Islands company can anticipate and avoid common pitfalls when entering into a joint venture agreement and describes some of the tactical options available to shareholders of a British Virgin Islands company when the shareholder relationship has irreparably collapsed. In both cases, the balance of decision-making power between the board of directors and the shareholders, as well as the main rights of investors (as shareholders of the BVI company), are usually documented at the level of the BVI company.
A bogged down BVI company can lead to enormous frustration for its shareholders: decisions often cannot be made either at the shareholder level or at the board level (either because quorum meetings cannot be held, or because no positive resolution can be made even at a quorum meeting), and decision-making regarding the affairs of downstream subsidiaries may also be thwarted for the same reasons. become.. .