Brief Fact Summary. Plaintiffs, Leopoldo Ramos et al., brought this action to enforce provisions of a shareholder agreement that required Defendants, Angel Estrada et al., to sell their shares of company stock if they did not vote as required per the agreement.
Synopsis of Rule of Law. Shareholder agreements, whether or not it is a close corporation, that require shareholders to vote according to the will of the majority are valid.
Nor is it against public policy for two or more stockholders to agree upon a course of corporate action, or upon the officers whom they will elect, and they may do this either by themselves, or through their proxies, or they may unite in the appointment of a single proxy to effect their purpose.View Full Point of Law
Issue. The issue is whether the shareholder agreement between the members of the Broadcast Corp. was valid and enforceable.
Held. The agreement was valid despite the fact that the corporation at issue was not a close corporation. California close corporation laws allow for such a shareholder’s voting agreement. The legislative comments concerning the California statute governing close corporations, Section 706, indicate that legislators did not intend the law to invalidate pooling agreements in instances where they were not close corporations. There was consideration provided for each member (to preserve their power in controlling the board of directors), and the provision here is especially necessary because the stock is not easily marketable, i.e. it has the characteristics of shares in a close corporation.
Discussion. The court emphasizes that the statute’s concern was to provide parties an opportunity to reach an agreement in cases where, absent the agreement, the parties may be damaged by an unforeseen event, such as a change in the majority voting block.