Belle owns 31 percent of the shares of Beauty, Incorporated (BI). Beast owns 20 percent. The remaining shares are owned by a dozen unrelated shareholders. Belle and Beast have entered into a shareholder agreement, drafted by independent counsel, stating they would vote their shares together on all matters, and that, if they fail to agree, Maurice will arbitrate their dispute and Maurice’s decision will be binding. Belle and Beast also executed perpetual irrevocable proxies, drafted by counsel, granting Maurice the power to vote their shares in accordance with the terms of the shareholder agreement. Belle and Beast have been able to elect the entire board of directors every year. The board currently consists of Belle, Beast, and Phillipe. Belle and Phillipe decided, as directors, to sell substantially all of BI’s assets to Gaston. Beast thinks the price is too low. Belle claims she no longer regards their shareholder agreement as binding. At the shareholders’ meeting at which the matter is to be put to a vote, Belle announces she is voting her shares in favor of the sale. Maurice says that since Belle and Beast disagree, he is voting the shares against the sale.
Part 1: Is the shareholder agreement between Belle and Beast enforceable? Discuss.
Part 2: Are the perpetual proxies executed by Belle and Beast enforceable? Discuss.
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