# kaal:claim:3017612-004

**Claim.** Shareholder agreement terms that limit board authority are vulnerable to invalidation, and the dominant judicial rationale is that such agreements tie the hands of directors and make it impossible for them to exercise discretion over the matters the agreement settles.

**Type.** failure  **Support.** argued

**Holds when.**

- provisions that encroach on the directors' statutory authority to manage the business and affairs of the corporation

**Source quote.**

> Courts offer varying rationales for nullifying terms of shareholder agreements that limit the board's authority, but most often, courts worry the agreements "tie the hands of the directors," making it impossible for them to exercise their discretion concerning matters decided in the agreement.

**From.** Wulf A. Kaal, *Shareholder Agreements - National Report of the United States of America* (2017), II. Regulation of Shareholders' Agreements, page 3

**Cite as.** Wulf A. Kaal, Shareholder Agreements - National Report of the United States of America (2017). SSRN: https://ssrn.com/abstract=3017612

**Verify.** sha256 of source PDF `33821db406f92efbe1698fbaed37687595c13b7ce5463b4a879df679fd4af1ac` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202017%20-%20Shareholder%20Agreements%20-%20National%20Report%20of%20the%20United%20States%20of%20America.pdf

**Failure mode.** director-discretion-sterilization  (family: board-and-oversight-failure)

**Topics.** corporate-governance

**Keywords.** board-authority, sterilization, director-discretion, invalidation, shareholder-agreements

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