What is required for shareholders to restrict directors' powers?

To restrict directors' powers effectively, a unanimous shareholder agreement is necessary. This requirement ensures that all shareholders are in agreement regarding the limitations imposed on the directors, reflecting a collective decision that enhances the control shareholders have over the governance of the corporation. Such an agreement is a formal and legally binding document that provides clarity and security regarding the intentions and expectations of shareholders concerning management's powers.

The rationale behind requiring unanimous agreement is to protect minority shareholders and ensure that significant decisions regarding the management of the company are made with full consideration of all shareholders' interests. This contrasts with a simple majority vote, which might not adequately represent the diverse interests of all shareholders, especially minority stakeholders, and could lead to conflicts or power imbalances.

Furthermore, formal written agreements can serve as a key reference in case of disputes or misunderstandings, thereby maintaining corporate governance integrity and promoting fairness among shareholders.