SHAREHOLDERS AGREEMENT IN COMPANY DRAFTING
A shareholders’ agreement is essentially a corporate pre-nuptial agreement. The key purpose of a shareholders’ agreement is to govern the relationship of the parties and how they behave towards each other while they are in the relationship, and when they end the relationship.
As with a pre-nuptial agreement, the shareholder agreement is prepared at a time when hopes are high and everyone is on their best behaviour. The new deal is exciting with limitless upside. The commercial team won’t necessarily want to think about what might go wrong and how they might need or want to extract themselves from the relationship. Part of the lawyer’s role on these transactions is to be the pessimist (or maybe the realist) and focus on these issues, so that, if things don’t go to plan, there are clear rules to play by.
This is a fascinating type of transaction for a lawyer to be involved in, as you may be helping to create a brand new business or breathing new life into an existing one. There are many issues to consider, in addition to the ones I have addressed, and many variations on the solution to the issues I have addressed. This is an area of legal practice where creativity is demanded.
You need to understand upfront what your client is seeking to get out of the venture they are going into, as that will inform other decisions such as the ownership structure, decision making and exit strategy.
Understanding how the new business fits into your client’s overall strategy is important. Shareholders’ agreements will often have restraints on the shareholders participating in competing businesses. The scope of the restraint which will be acceptable to your client will be affected by:
- any existing businesses they have which may overlap with the new business; and
- the client’s strategy for growth of its own business – are they totally committed to growth through the new venture or are there related activities they may want to participate in, outside the new venture?
Easydrafting.in role in providing Shareholders agreement:
|PREPARATION TIME||2 to 3 days after we receive the details for preparing the shareholders agreement|
|VALUE OF THE STAMP PAPER||Rs. 100 (Will be provided by us)|
|NOTARY||Required (Will be provided by us)|
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