Shareholder Agreements in India: An Unsettled Jurisprudence.

Shareholder agreements (SAs) are becoming more common around the world as the ownership of companies become more concentrated. Larger investors— in particular, private equity investors— often document their understandings about their investments in increasingly sophisticated SAs. India has also witnessed a rise in SAs, usually with foreign private equity players, which reflects a level of sophistication and formality in contract negotiations that was not always present when such agreements were between family or affinity groups. This has placed increasing pressure on Indian case law to evolve in response to these agreements. This chapter explores that response and finds that it is difficult to identify a unifying thread to the treatment of SAs in case law. Indeed, it appears that many different considerations animate the emerging case law, making it difficult for contracting parties to understand the legal terrain. The chapter then argues that greater conceptualization of the concerns at play would facilitate the development of a less confusing jurisprudence, which would inure to the benefit of all. It also begins the process of sketching out some of that conceptualization. Section II begins by describing what SAs are and why they are important. In particular, we spend some time discussing the recent rise of SAs involving private equity, which tend to have more sophisticated provisions than agreements in the past and tend to be more carefully lawyered. Section III explores how the law in India addresses SAs and some changes in recent years. Section IV discusses the policy concerns at play. Section V concludes with observations about the state of Indian law on SAs and what steps may benefit its development and the involved parties. It also notes that the very recent proposal by the Securities and Exchange Board of India (SEBI) to require disclosure of certain agreements is a commendable first step in that direction but that some provisions in the proposal may benefit from more careful discussion attuned to the sorts of policy considerations highlighted in this chapter.