Raising capital is often treated as a milestone in a startup’s growth. Yet, investment brings more than funding. Shareholders’ agreements can give investors the power to restrict key business decisions, sometimes creating conflict between investor protection and management autonomy.

A recent order of the Delhi High Court highlights how these contractual rights can become the subject of litigation.

The Dispute: A Shareholder’s Veto

In Resilient Innovations Private Limited v. Unity Small Finance Bank Limited, the Delhi High Court considered a dispute involving BharatPe, which held a 49% stake in Unity Small Finance Bank following an investment of approximately ₹746 crore.

The dispute arose over the bank’s proposed increase in authorised share capital and amendment to its Memorandum of Association. BharatPe contended that the proposed actions fell within the “Reserved Matters” under the Shareholders’ Agreement dated 26 October 2021, requiring its prior written consent.

Seeking interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, BharatPe challenged the proposed action. By its order dated 24 July 2026, the Delhi High Court found a prima facie case and restrained the bank from tabling, considering or approving the relevant agenda item.

The order was interim in nature; it did not finally determine the parties’ contractual rights. Nevertheless, it illustrates how consent provisions can influence corporate decision-making even where a shareholder does not hold a majority stake.

The Legal Significance of Reserved Matters

Reserved Matter clauses identify decisions that require investor consent, notwithstanding the ordinary allocation of management powers. Depending on the agreement, these may include changes to share capital, amendments to constitutional documents, borrowing beyond specified limits, related-party transactions, asset sales or changes in business operations.

Such clauses are intended to protect investors against decisions that could materially affect their investment. However, broadly drafted provisions can also restrict a company’s ability to respond quickly to commercial requirements.

The critical issue is therefore not merely whether an investor has veto rights, but whether the relevant decision falls within the scope of those rights and whether the prescribed approval process has been followed.

The Shareholders’ Agreement and Articles of Association

A further consideration is the relationship between a Shareholders’ Agreement and the Articles of Association .While an SHA records contractual obligations among its parties, the AoA governs the company’s internal framework under company law.

In V.B. Rangaraj v. V.B. Gopalakrishnan (1992), the Supreme Court addressed restrictions on share transfers contained in an agreement but absent from the company’s articles. The decision remains relevant to the enforceability of shareholder arrangements, although its application depends on the nature of the restriction and the legal context.

For startups, this makes consistency between the SHA and AoA particularly important. A contractual consent right should not be assumed to operate identically at every level of corporate governance merely because it appears in an investment agreement.

What Startups and Investors Should Consider

Founders should examine the scope of investor consent rights before accepting funding. Vague or excessively broad clauses can create uncertainty over routine management decisions, while investors need clearly defined protections for matters that could materially affect their investment.

Drafting should distinguish strategic decisions from day-to-day operations, specify approval thresholds and timelines, and address the consequences of non-compliance. The SHA and AoA should also be reviewed together to reduce inconsistencies and potential disputes.

The larger lesson is that startup funding is not only a negotiation over valuation and dilution. It is also a negotiation over decision-making authority. When the boundaries of that authority are unclear, a provision intended to protect an investment can become the basis of a corporate dispute.