The above issue shall be having a guideline in the article of association.The issue of conflicting provisions in a Shareholders Agreement (SHA) and the articles of association (Articles) of a company is a never ending debate, and perhaps a rather confounding one in company law. A recent order of the Delhi High Court in World Phone India Pvt. Ltd v. WPI Group Inc USA,  178 Comp Cas 173 (Del), holding that clauses in a SHA which are not repugnant to the Companies Act but not incorporated in the articles of the Company, would be unenforceable, has only added to this confusion. This post is an attempt to expound the law surrounding this decision.
"Indian companies paid little or no regard to related-party transactions and there was little scrutiny of such transactions that were detrimental to the interests of minority shareholders," says Shriram Subramanian, founder and managing director, InGovern Research Services. Legal experts say the previous version of Securities and Exchange Board of India (Sebi)'s listing agreement under Clause 49 did not have elaborate provisions for related party transactions. The new Companies Act and the revised listing agreement brought related party transactions into focus with minority shareholders needing to approve related party transactions.
Still requirements under related party transaction provisions fall short of global best practice in this regard. Globally, the best practice is related party transactions are voted for by a majority of minority shareholders, with all related parties getting no votes. However, according to an amendment to the Act requires only the specific related party with whom the transaction was taking place getting no votes, while other connected parties to the related party get to vote.
Tax perspective can be discussed with an auditor.