Do the owners of a company in Trinidad and Tobago need a shareholders' agreement?

Without an agreement

The directors manage the business and affairs of the company, subject to the articles and any unanimous shareholder agreement (Companies Act (Chapter 81:01), s 60). Shareholders control the board mainly by electing and removing directors, usually by ordinary resolution, which is a simple majority of the votes cast (ss 4, 71(3), 75(1)). Unless the articles say otherwise, each share carries one vote on a ballot (s 128). So a shareholder with more than half of the votes can usually decide who sits on the board.

The unanimous shareholder agreement

An "otherwise lawful written agreement among all the shareholders", with or without an outsider, "that restricts, in whole or in part, the powers of the directors" to manage the company is valid (s 137(1)). A person who beneficially owns all the issued shares can do the same by written declaration (s 137(3)).

Its effects under the Act:

• To the extent it restricts the directors' powers, the shareholders who are parties take on "all the rights, powers and duties" and "all the liabilities of a director", and the directors are relieved to the same extent (s 137(2)).
• Directors must comply with it (s 99(5)).
• Anyone to whom shares subject to it are transferred is deemed to be a party, and the share certificates must say that the shares are subject to it (s 196(1), (2)).
• The company must keep a copy at its registered office, and each shareholder may have a free copy (ss 177(1)(a), 190(2)).
• A complainant or creditor may ask the court to order compliance with it (s 249).

Written notice of its execution or termination, with the date, must be filed with the Registrar within 15 days. The Registrar may collect a penalty of TT$100 for each month or part of a month of delay (s 137(4)).

Other agreements between shareholders

An agreement signed by some, but not all, of the shareholders, or one that does not restrict the directors' powers, is not a unanimous shareholder agreement. It is an ordinary contract between those who sign it.

The Act expressly allows two or more shareholders to agree in writing how they will vote their shares (s 136(1)). A party who is let down cannot sue the company because shares were not voted as agreed (s 136(2)).

Restrictions on selling and issuing shares

If transfers of shares are to be restricted, the articles must say so and describe the restriction (s 9(1)). Adding, changing or removing a transfer restriction later needs a special resolution: at least 75% of the votes cast at a meeting called on at least 21 days' notice, or a written resolution signed by all the voting shareholders (ss 4, 214(1)(l)), and a shareholder of the class affected who dissents and follows the procedure in s 227 is entitled to be paid the fair value of his shares, unless there are reasonable grounds for believing that the company is, or after paying would be, unable to pay its liabilities as they fall due, or that its assets would fall below its liabilities (ss 227(1)(a), (4), 236).

When the company issues new shares of a class, the existing holders of that class have a right to be offered them first, in proportion to their holdings, unless the articles provide otherwise (s 38(1)).

What small-company owners often agree

Within the limits of the Act, owners commonly use a shareholders' agreement, the articles or both to settle:

• Board seats. How a minority owner keeps a seat. The articles cannot make it harder than an ordinary resolution to remove a director (s 10(2)), so owners use a voting agreement (s 136) or give a class of shares the exclusive right to elect a director (s 75(2)).
• Reserved matters. Decisions, such as borrowing, selling the business or issuing shares, that need every owner's consent. Because this restricts the directors' powers, it belongs in the articles or a unanimous shareholder agreement (ss 65, 137).
• Deadlock. What happens if the owners cannot agree, such as mediation, arbitration or a buy-out procedure.
• Exit. A right of first refusal when an owner sells, and what happens when an owner dies, leaves or wants out, including how the shares are valued.

A provision in the articles restricting the directors' powers can be changed only with the consent of every shareholder (s 214(2)).