Share Purchase Agreement
A shareholder’s agreement, also known as a stockholders’ agreement, is a legal contract between the shareholders of a company in India. It outlines the rights, responsibilities, and expectations of all shareholders regarding company ownership and operations.
Key Elements of a Shareholder's Agreement in India:
- Parties Involved: Identifies all shareholders of the company and their shareholding percentages.
- Voting Rights: Defines voting rights for different classes of shares (if applicable) and procedures for major decisions, such as electing directors, approving mergers/acquisitions, or issuing new shares.
- Management and Control: Specifies the roles and responsibilities of shareholders in company management, including participation in board meetings and potential limitations on individual shareholder involvement.
- Shareholder Disputes: Establishes a mechanism for resolving disagreements between shareholders, minimizing disruption to the company’s operations.
- Confidentiality: Includes confidentiality clauses to protect sensitive company information.
- Preemptive Rights (Optional): Grants existing shareholders the first right to purchase additional shares offered by the company, maintaining their ownership percentages.
- Right of First Refusal (Optional): Gives existing shareholders the first opportunity to buy shares from another shareholder who wants to sell, potentially preventing unwanted external ownership.
- Drag-Along and Tag-Along Rights (Optional): Protects minority shareholders by allowing them to participate in the sale of the company if a majority shareholder decides to sell their shares (drag-along) or tag along with a majority shareholder selling their shares (tag-along).
- Shareholder Exit Strategy: Defines procedures for shareholders to exit the company, whether through voluntary share sales, buyouts by other shareholders, or death/disability.