A Joint Venture Agreement is a written understanding of terms and conditions between the partie...
A shareholders‘ agreement is an agreement between the shareholders of the company. A purpose to create the Shareholders agreement is to protect the shareholders‘ investment in the company, to establish a fair, transparent relationship between the shareholders and the company in which the shares have been subscribed. The Shareholder agreement establishes the shareholders‘ rights and obligations and provides an element of protection for minority shareholders and the company.
Therefore an agreement is important to fully determine the basis for important decision making, to restrict the power of the directors where necessary and to provide protection for the parties involved in the ownership of the company against the actions of the others, whether minority, majority or equal shareholders.
An agreement typically reserves few matters that specifically mentions the matters in which the decision will be taken either by special resolution that is 75% vote in favor or by ordinary resolution.
The main objective to draw the shareholders agreement is to put in place rights and rules which are in addition to the rules given in the Companies Act, 2013.
The main and most important element of a shareholding agreement that is to be mentioned is as follows:-
An agreement must begin with the definitions of the legal terms and their interpretation used in the agreement. Legal terms like; Act, agreement, affiliate, Angel investor, Article, CCPS, Confidential Agreement, Encumbrance, Equity Shares, Reserved Matters, Transfer and many more. To avoid misconception and dispute between the parties it is mandated to define all the terms very clearly.
The date when the agreement shall become effective and tenure of the agreement.
The company shall be capitalized managed and structured in accordance with this agreement comply with the MOA and AOA.
In the event any of the provisions of the agreement are inconsistent with the MOA and AOA, the terms of this agreement shall prevail, to the extent of the inconsistency.
The name of the company and its date of incorporation.
Name of the investors and promoters who agree to jointly invest in the company.
Address of registered office of the company is situated at [COMPLETE ADDRESS OF THE Company].
A brief description of the business activity of the company and declaration that company shall not carry any other activity without the consent of the Board
Disclosure of the complete investment of the company:
|S no.||Name of the Shareholder||Number of Shares||Value per Share|
It is hereby declared or agreed that no further issue shall be made by the company without the consent of the founders or promoters.
The promoter shall be responsible for the day to day working of the company.
Promoters will act in good faith and act to protect the interest of the shareholders of the company.
Promoters will be equal in stature and will hold executive posts in the company.
Both the Promoters and Directors will take independent decisions regarding the defined areas and will be bound by the terms of this agreement.
Matters on which the decision shall not be taken by the board unless the prior consent of members or shareholders is obtained by the resolution. Incident or affair of such nature are as follows:-
In an unlikely case of disagreement between the parties, the same shall be resolved by the mutual consent of the parties in a meeting of Board and Shareholder.
In case the meeting remains inconclusive the case shall be resolved by the arbitrator and the decision of the Arbitrator shall be final. An arbitrator shall be appointed by the mutual consent of the parties.
Name of the auditor who shall audit the financials of the company and tenure of the auditor.
Further, the auditor of the company shall not be changed without the consent of the shareholders and directors.
A shareholder agreement may also include the following clauses:-