Minority Shareholder Right to a Director Clause

Minority Shareholder Right To A Director Clause

CO.SH.02.03
This Minority Shareholder Right to a Director Clause is for use in a Shareholders’ Agreement where one of the investors is a minority shareholder and would be unable to ensure that he stays involved in the management of the company through the exercise of his own voting rights alone.

The clause creates a legally enforceable right for a minority shareholder to hold a position on the board of the company, which would otherwise not exist. Without such a clause a minority shareholder is always vulnerable to being squeezed out of the management of the company by the other shareholder(s). The other shareholders in the company give an undertaking to use their voting powers to ensure that the minority shareholder director is appointed to the Board. The shareholders also undertake to remove any director who votes against the appointment or reappointment of the minority shareholder director and suspend that director for a specified minimum period. An optional clause is included whereby the minority shareholder can also delegate his right to be a director to a third party who will have exactly the same protection.

This Minority Shareholder Right to a Director Clause is already included in the documents “Shareholder Agreement - Long - New Share Issue - Minority Shareholder Bias” and “Shareholder Agreement - Long - No Share Issue - Minority Shareholder Bias”.

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