Contractual Aspects of Shareholders’ Duties

Popular rhetoric has tended to think in terms of shareholders’ rights rather than shareholders’ duties. It is well understood that shareholders can bargain for rights within a company via a shareholders’ agreement, or via the company constitution, and that the law also steps in to provide shareholders with rights in some circumstances. It is less common to consider how duties may be imposed upon shareholders, but there are various circumstances in which such duties may arise. The issue of shareholders’ duties has come to the fore recently within Europe as a result of the proposed amendments to the Shareholder Rights Directive, which contemplate both the creation of a number of additional rights for shareholders and, more unusually, the imposition of duties on institutional shareholders, such as a duty to draw up and publicly disclose their engagement policy. This paper considers the circumstances in which duties are imposed on shareholders and the role that contract law plays in this regard. It is argued that while some shareholders’ duties can be (and are) imposed contractually, the imposition of other duties, particularly those to which the shareholders are unlikely to consent freely, will require the law’s intervention, but that the law’s ability to do so should be utilised sparingly.