Corporate Shareholder Agreement Governance-Override Requirements in South Dakota

At a glance

Requirements one by one

A qualifying agreement can displace the Act's board defaults

South Dakota makes a Section 47-1A-732 agreement effective among the shareholders and the corporation even when it conflicts with another provision of the Business Corporation Act. The ordinary rule still requires a board and places corporate powers and management under its direction, but Sections 47-1A-732 through 47-1A-732.6 and 47-1A-801 expressly recognize the qualifying agreement as an exception (S.D. Codified Laws §§ 47-1A-732, 47-1A-801).

The statutory menu reaches board elimination or restriction, distributions subject to Sections 47-1A-640 through 47-1A-640.5, director and officer selection or removal, divided or weighted shareholder/director voting and director proxies, insider property or services arrangements, transferred management and deadlock authority, dissolution triggers, and a residual governance category bounded by public policy.

Formation is unanimous, while amendment and duration can vary

The agreement may be set out in the articles of incorporation or bylaws and approved by every person who is then a shareholder. Or it may be a separate writing signed by every then-current shareholder and made known to the corporation (S.D. Codified Laws § 47-1A-732.1). The separate-writing route does not state that the corporation must sign as a party or that the board must set consideration.

Unless the agreement provides another rule, amendment requires all persons who are shareholders at the amendment time. The initial and default amendment groups are therefore different snapshots. The agreement is valid for ten years unless it provides another term; the current agreement sequence states no separate renewal, extension, legacy-agreement, or successor-holder rule.

Before any shares issue, incorporators or share subscribers may act as the shareholders for this purpose (S.D. Codified Laws § 47-1A-732.6). A beneficial owner counts as a statutory shareholder only to the extent of rights granted by a nominee certificate on file with the corporation (S.D. Codified Laws § 47-1A-140(35), (39)).

Share notice and purchaser rescission follow separate rules

The existence of the agreement must be stated conspicuously on every outstanding share certificate or on the information statement for uncertificated shares. If certificated shares are already outstanding, the corporation must recall the certificates and issue compliant substitutes. Omitting the notice does not invalidate the agreement or corporate action under it (S.D. Codified Laws § 47-1A-732.2).

A purchaser who lacked knowledge when purchasing may rescind. Compliant certificate or information-statement notice creates deemed knowledge; for an uncertificated share, the information statement must also reach the purchaser at or before purchase. The action must begin by the earlier of ninety days after discovery of the agreement or two years after purchase.

Public trading ends the route and transferred power moves liability

The agreement ceases when shares become nationally listed or regularly traded in the market the statute describes. After an agreement ends for any reason, the board may remove it and its references from the articles or bylaws without shareholder action (S.D. Codified Laws § 47-1A-732.3).

To the extent an agreement limits board discretion or power, directors are relieved of director-law liability and the persons receiving the power assume that liability. The agreement, partnership-like treatment, or failure to observe covered corporate formalities is not by itself a ground for imposing personal liability on a shareholder for corporate acts or debts (S.D. Codified Laws § 47-1A-732.4; S.D. Codified Laws § 47-1A-732.5).

What trips people up

Notice omission has a split consequence. It does not invalidate the agreement or action, but it can preserve rescission for a purchaser who lacked knowledge. The ninety-day discovery period never extends the outside two-year purchase limit; the earlier deadline controls.

The ten-year rule is a default, not an absolute maximum. The agreement may set a shorter or longer term, but silence leaves the statutory ten-year term in place.

The public-market cutoff is automatic. A private-company agreement does not keep its Section 47-1A-732 effect after national-exchange listing or the specified regular trading begins, even if the agreement itself says it continues.

Common questions

Must the corporation sign the separate South Dakota agreement?

Section 47-1A-732.1 does not state a corporation-signature requirement. It requires every current shareholder to sign the writing and requires the agreement to be made known to the corporation.

Who approves an agreement before any shares are issued?

Incorporators or subscribers for shares may act as shareholders when no shares have been issued. Once shares exist, the all-current-shareholder rule applies to the persons who qualify as shareholders when the agreement is made.

Can the board remove charter references after the agreement ends?

Yes. If the agreement is contained or referred to in the articles or bylaws, Section 47-1A-732.3 permits the board to adopt an amendment deleting the agreement and its references without shareholder action after the agreement ceases for any reason.

Statutes and sources

• S.D. Codified Laws § 47-1A-140(4), (35), (39) — domestic for-profit corporation, shareholder, beneficial-owner, and subscriber definitions. Official South Dakota Codified Laws, accessed August 28, 2026.
• S.D. Codified Laws §§ 47-1A-732 to 47-1A-732.2 — corporation-binding effect, subject menu, formation, amendment, ten-year default, notice, recall, validity, purchaser knowledge, and rescission. Agreement effect, form and term, and notice and rescission, accessed August 28, 2026.
• S.D. Codified Laws §§ 47-1A-732.3 to 47-1A-732.6 — public-market cutoff, deletion amendment, transferred director-law liability, shareholder personal-liability protection, and no-shares participants. Public-status rule, liability transfer, shareholder protection, and pre-issuance participants, accessed August 28, 2026.
• S.D. Codified Laws § 47-1A-801 — ordinary board requirement and Sections 47-1A-732 through 47-1A-732.6 exception. Official South Dakota Codified Laws, accessed August 28, 2026.