Shareholder Agreement Vs Share Subscription Agreement

The agreement talks about the right of minority shareholders. It determines the liability, privileges and protection of shareholders. A shareholders` pact is not mandatory in Indian law, but it is binding as it is a contractual agreement. Minority shareholders are shareholders who hold less than 50% of the company`s shares. Most of the time, the majority parts of the company are the founders and promoters of the company. The company`s decisive and important decisions are made only by them. In such scenarios, it is very important that the company`s minority shareholders have a protective shield that protects their interests. It will require that the shareholders` pact include clauses guaranteeing that the money a shareholder invests in a company is not exhausted for other purposes. Let us now consider how this transfer of shares is legally owned by a shareholder and what types of agreements a company and shareholders can enter into with the company to make this transfer of money and shares legally binding and enforceable.

Although these agreements are not governed by any particular law, the terms of these agreements are most often mentioned in the statutes of companies. AOA is essentially a document that defines the roles and responsibilities of directors, the type of transactions to be carried out and the means by which shareholders exercise control of the board of directors. Running a business is the most important asset. In the absence of adequate capital, no business can be managed properly and to ensure the smooth running of all the operations that developers need to bring capital from time to time with available resources. To this end, the shares are issued to investors in exchange for the amount they invest. In general, the equity subscription contract is the first document that a company issues and plays a decisive role for each investor to invest in a business. This agreement allows an investor to know his control, his role, his returns on the investments he will get after the allocation of the shares. This agreement should be developed in such a way that both the company and the investor benefit from reducing the investor`s risk and maintaining the company`s powers and roles after the investment. The subscription contract is very similar to the terminology sheet and does not contain so many new things. Some things are explained in more detail, such as guarantees and compensation, but it is very simple.

There are two common aspects that create and establish the relationship between the two parties. This is the shareholder contract and the share purchase agreement. One party uses it so that the other party that invests can also participate in the process. The shareholding agreement and the shareholder contract are signed at the end of the due diligence process when setting up a company. Although these are two separate documents, they are sometimes put together in a single document, known as the “investment agreement.” However, it is recommended that they be kept separately for clarity. The main objective of this share purchase agreement is to prove that both parties have agreed on the terms and conditions and that the amount of the shares must be transferred from the seller to the buyer and at what cost.