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SHAREHOLDERS' AGREEMENT

WHAT IS A SHAREHOLDERS' AGREEMENT?

A shareholders' agreement, also called a stockholders’ agreement,

is an arrangement among a company's shareholders that describes

how the corporate should be operated and explains shareholders' 

rights and obligations. The agreement also includes information on

the management of the corporate and privileges and protection

of shareholders.

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KEY POINTS

  • A shareholders' agreement is an arrangement among a company's shareholders that describes how the corporate should be operated and explains shareholders' rights and obligations.

  • The shareholders' agreement is meant to make sure that shareholders are treated fairly and that their rights are protected.

  • It also allows shareholders to make decisions about what outside parties may become future shareholders and provides safeguards for minority positions.

  • The agreement includes sections outlining the fair and bonafide pricing of shares (particularly when sold).

  • A shareholders’ agreement includes a date, often the quantity of shares issued, a capitalization table, outlining shareholders and their percentage of company ownership, any restrictions on transferring shares, pre-emptive
    rights for current shareholders to purchase shares (in the event of a new issue to keep up their percentage of ownership), and details on payments within the event of a corporation sale.

WHAT ARE THE ADVANTAGES OF A SHAREHOLDERS' AGREEMENT? 

Clears Authority

A shareholders' agreement India clears the authority and standing of a shareowner and therefore the license you stock because the issuer of such shares by characterizing the

power and risks for all. Additionally, it mediates as a governor of the interaction between small and big shareholders.

Ease In Making Amendments

A shareholders' agreement facilitates the right conditions for making amendments to the corporate constitution. It's suitable for small-scale and medium businesses that don't wish to officially change the whole constitution whenever minute changes are required to be made.

RIGHTS OF A SHAREHOLDER

01

Right to vote

04

Right to appoint directors and the company auditor

02

Right to ask for a

general meeting

03

Right to the financial statements of the company

05

Right to inspect the books & registers of the company

WHAT SHOULD A SHAREHOLDERS' AGREEMENT INCLUDE? 

1. Regulations related to the transfer and sale of shares of the company:

Certain rules need to be incorporated in a shareholders agreement India to protect the shareholders’ interest with regards to the transfer and sale of company shares.


2. Financial requirements of the company:  

Shareholders can proceed to obtain the most feasible source of funding, whenever they think it to be beneficial for

the company. The shareholders' agreement draft includes the procedure to obtain such finances.

3. Requirements of quorum:

The shareholders' agreement will mention the requirements related to a quorum (the minimum number of members required to constitute a valid meeting)


4. Methods for Valuation of shares of the company:

Considering the frequent fluctuations in the market, proper valuation of company shares is extremely important for

the fortunes of the company. The valuation methods and approaches are laid down precisely in the shareholders'  agreement India.

5. Guidelines to run the company:

The shareholders' agreement would contain the guidelines, policies, and procedures to ensure the smooth running

of the company on a day-to-day basis.


6. Shareholder Liabilities: 

Shareholders only have limited liability with the company and are not liable directly for the activities of the company. The liabilities of the shareholders are defined clearly in the agreement.

7. Protection of minority shareholders: 

The rights of the minority shareholders, as per provisions of the Companies Act, 2013, are laid down in the shareholders' agreement. The agreement will ensure the protection of the minority shareholders in the event

of mismanagement, oppression, or Piggy Backing (sale of shares by majority shareholders).

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