Shareholder Agreements Under Companies Act 2013

« If one of the shareholders wishes to sell at any time all or part of his shares to the company, the shareholder must first provide those shares in writing to the other shareholder. If the other party does not accept the offer within XX Days, the first party is free to sell the shares thus offered to another person of its choice, at the same price and under the same conditions as those contained in the offer made to the other party in the first instance. « An enterprise is an artificial legal person and a registered association, consisting of a voluntary association of many people who come together to manage their business activities and make a profit or perform a non-profit function. Under the Companies Act 2013, a business is only considered a « business » if it was or is established in accordance with that or a previous corporate act. A company can be a private, public or single company. A company may be established in accordance with Section 8 of the Promotion of Commerce, Art, Science, Sport, Education, Research, Social Assistance, Religion, Charity, Environmental Protection or Other Non-Profit Object Act. [1] Had there been an SHA in the two situations mentioned above, there would have been a better understanding between the co-investors and a strategy could have been formulated to achieve the company`s business objectives. In other words, SHA protects the interests of minority and majority shareholders and does the business of a company smoothly. It all depends on the correct wording of the SHA and its legal validity.

While it is common for a shareholder with a substantial interest to hold a position on a company`s board of directors, the Companies Acts do not grant a shareholder holding a minority interest the right to hold a position on a company`s board of directors. In addition, standard companies do not grant such a right. Accordingly, it is important that a minority shareholder who wishes to sit on the board of directors do so in a shareholders` agreement. Often, you will find that such a right to a seat on the board of directors is subject to the shareholder maintaining a certain minimum stake in the company and/or the retention of an employee of the company (or an affiliate). In addition, it is necessary to examine whether the right to appoint a director is personal to the shareholder (i.e. the shareholder can only appoint himself) or whether he can appoint another party in his place. It is also necessary to examine whether the right to appoint a director can be used for a person who acquires the shares of the original shareholder. The answers to these questions are ultimately dictated by the facts of each situation..

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