It is in the interests of shareholders and the company concerned to have a shareholders` pact to cover their rights and obligations. This is what the right that a majority and minority shareholder will have in the context of a future sale of the company. It is usually created in place of a merger or takeover of a business. It allows a majority shareholder to induce a minority shareholder to participate in the sale of the company or the majority shares of the company. As a general rule, some minority shareholders do not agree with the proposed sale in the event of a merger, which prolongs the merger/acquisition process. This clause ensures that the majority shareholder, in the exercise of its superior power, grants the minority shareholder the same price and conditions as the other shareholders. The clause is intended to protect both shareholders. Berkeley legally provides corporate secretariats that include the development of shareholder agreements based on the company`s structure. We are able to advise your company on the appropriate clauses and their effects. In this article, Daksh Gautam, A graduate in Entrepreneurship Administration and Business Law from NUJS, Kolkata discusses the main provisions of a shareholder contract. Some shareholders inevitably want to sell their shares, so a shareholders` pact may involve a right of first refusal that obliges a shareholder who wishes to sell to give other shareholders the right to respond to an offer from a third party.
The rights of the first refusal protect the company and unsold shareholders from the sale of shares to hostile parties or competitors. The right to the first offer is a contractual obligation for the seller of shares to offer them initially to a shareholder or a group of shareholders. This clause is a benefit to the seller and gives the buyer a time to make an offer on the shares for sale. The seller may accept or refuse the sale to the buying shareholder if the price is not correct, and therefore offer the shares to third parties. The difference between the latter and the right to first refusal lies in the fact that the buying investor has an advantage in the latter situation. These provisions must be clearly defined in the shareholders` pact in order to avoid shareholder disputes. Shareholders often have access to trade secrets, standard operating procedures, client and source lists, research and development, financial details and other sensitive or confidential information. A SHA may contain non-disclosure and non-competition clauses, compel shareholders to keep the secret and prevent them from working for competitors or other parties for whom the interests of the company could be harmed. In addition, this language may also contain a non-invitation clause that prevents or prevents a shareholder from making transactions with a company or person who has been or is the company`s customer. To protect outside investors, there are anti-dilution clauses that are often at the expense of founders, former unprotected outside investors or other shareholders. They are not ideal for non-beneficiaries of anti-dilution rules, but the reality is that most of the most serious and experienced investors expect anti-dilution protection.