In any event, any investor willing to invest Crores and Crores in a business will expect a certain type of rights and authority within that company, and that is to that end that the agreement will be executed. Since no one can predict what may happen in the future and what type of litigation may arise between the parties, the shareholders` pact plays a decisive role in resolving disputes. This agreement not only helps a majority shareholder, it is also very beneficial for minority shareholders. 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. On the other hand, the shareholders` pact defines the relationship between shareholders, defines the terms of the company`s participation and is not directly related to the investment process itself.
The shareholder contract is a contract signed by a company`s shareholders and generally contains details such as restrictions on the transfer of shares, drag-Along/tag Along clauses, non-compete clauses, share issuance, termination of shareholder contracts and employment issues. In the previous paragraphs, it can be concluded that any type of agreement, whether it is possible to enter into a share purchase agreement, a share subscription contract or a shareholder contract, in order to protect the investor and the company from litigation. Each of these three agreements has its own specificities. It is not a golden rule to enter into an agreement to sell or purchase a stock, but to contain the problems that may arise in the future, it is always advantageous to give a written form to these transactions, that is, to conclude an agreement. For a better practical understanding, please read the typical share purchase agreement here. When a company needs to raise capital, one option is to issue shares that can be acquired by private placement or by the Public. A prospectus is a document used when a company sells shares of its shares to the general public. This document contains information about security, company history and other details that a potential investor should know. It is an exchange of promises between a potential shareholder known as a subscriber and a company. A share purchase agreement provides that the company agrees to sell a certain number of shares at a specified time and price, so that the subscriber becomes a shareholder. In return, the subscriber agrees to buy the shares at a certain time and price.
From the name itself, we can imagine an agreement in which the shares are transferred from one party to another. The shares give the shareholders (who owns the shares) ownership of the company and this can be done by acquiring a share of the company or the existing shareholders of the company. To make any transfer legally binding, it is always advisable to enter into a contract. The main purpose of a share purchase agreement is to show how many shares must be transferred and at what price, as part of the private placement procedure, the new shareholder receives a private placement memorandum after qualifying. This memorandum contains a description of the investment and is usually accompanied by a share subscription contract.