SHARE HOLDING AGREEMENT
THE LAWWAY WITH LAWYERS JOURNAL VOLUME:- 4 ISSUE NO:- 4 , NOVEMBER 26, 2023 ISSN (ONLINE):- 2584-1106 Website: www.the lawway with lawyers.com Email: thelawwaywithelawyers@gmail.com SHARE HOLDING AGREEMENT PRAKHAR SINGH LAW FACULTY UNIVERSITY OF LUCKNOW ABSTRACT In March 2023 Adani Enterprises through its indirect subsidiary RRPR bought the additional 1.76 crore shares of NDTV for ₹602 crore, from NDTV promoters Radhika and Prannoy Roy. This amounted to a 27.26 percent stake in the company. With this transfer of shares, Adani owns a 64.71 percent stake in the company. RRPR was initially a promoter-owned company, which Adani Group’s AMG network acquired in August 2022 by conversion of warrants.1 Now the question arises what are these shares and how do they manage the administration of the company? In day-to-day life, many company’s shares are bought or acquired. Companies with huge profits someday shut down and company with less recognition a society gets a boom in the economic era. Companies sometimes time not have a single administrator or owner, it is run by a group of people who have their share in a company and to make the legally binding share, an agreement is signed by the members of the body who have real authority over the company, which is soon treated as contract.2 With time many startups and new companies are evolving and how it manage a smooth run with so many shareholders. 1 https://www.thehindubusinessline.com/companies/adani-group-officially-becomes-majority-shareholder-in- ndtv 2 Indian Contract Act 1872, Section 2H VOLUME:- 4 ISSUE NO:- 4 , NOVEMBER 26, 2023 ISSN (ONLINE):- 2584-1106 Website: www.the lawway with lawyers.com Email: thelawwaywithelawyers@gmail.com This article deals with the shareholding agreement, its legal foundation and framework, and how it protects minority as well as majority shareholders. Major case laws that shape the corporate sector are more relevant. It defines the rights of the majority as well as the minority and the role of government in a shareholding agreement. It deals with the transaction of cross border as well as individual stakeholders of companies. The legal environment is largely created by governments, but when creating shareholding agreements, businesses and legal experts must understand and abide by these regulations. To guarantee that agreements comply with the law and reduce the risks of non- compliance, legal advice is necessary. A shareholding agreement is an essential tool for encouraging cooperation, safeguarding the interests of shareholders, and offering a strategic road map for long-term success. INTRODUCTION DEFINITION AND PURPOSE OF SHAREHOLDING AGREEMENTS Shareholding agreements3 a private documents in the form of an inter se contract between the shareholders of the company defining the rights, obligations, and privileges and it helps in the management of the company. These are also known by the name of stakeholder agreements. It is a legally binding contract between the stakeholders of the companies, it supplements the company’s constitutional document such as the company’s constitution and its article and it provides more detailed regulation. It is an arrangement among the company’s shareholders that describes how the company should be operated. The role of these agreements in corporate life is much more significant to avoid future ambiguousness or intricacies PURPOSE OF THE SHAREHOLDING AGREEMENT CLARIFYING THE RIGHTS AND OBLIGATION OF SHAREHOLDER SAFEGUARDING THE MINORITY SHAREHOLDER 3 Company Act,2013, Section 399 ISSN (ONLINE):- 2584-1106 Website: www.the lawway with lawyers.com Email: thelawwaywithelawyers@gmail.com MANAGING THE TRANSFER OF SHARE RESOLVING DISPUTE AMONG STAKEHOLDER ESTABLISHING THE REGULATION FRAMEWORK FOR DECISION MAKING VOTING RIGHTS AND PROCEDURE BOARD COMPOSITION AND APPOINTMENT PROCESS When it comes to running a company smoothly, a well-drafted shareholder agreement serves as an indispensable tool. Armed with protection for shareholders and a robust framework for decision-making, this vital document paves the way for effective governance. Whether you’re embarking on a new venture or looking to solidify an established business, understanding the key components and intricacies of shareholder agreements is paramount. It lays the groundwork for growth and success in the ever- evolving world of corporate enterprise. A Solid Foundation for Growth and Success Imagine a ship sailing through uncharted waters without a compass or a well-defined direction. Without a shareholder agreement, a company could find itself in a similar predicament. This agreement acts as a navigational guide, providing shareholders with a clear roadmap for their collective journey. By outlining important provisions such as rights and responsibilities, share transfer procedures, and dispute resolution mechanisms, it ensures clarity and transparency amongst stakeholders. Protection for Shareholders One of the primary objectives of a shareholder agreement is to protect the interests of shareholders. It acts as a safety net, safeguarding their investments and ensuring fair treatment. For instance, minority shareholders often face unique challenges in decision- making processes. A well-crafted agreement can empower them by incorporating provisions that protect their rights and prevent any undue marginalization. By doing so, it fosters an environment of inclusivity and encourages active participation from all shareholders, regardless of their stake size. Establishing a Robust Framework Effective decision-making is the lifeblood of any successful business. A shareholder agreement plays a pivotal role in establishing a robust framework that facilitates this crucial process. By clearly defining voting rights, quorum requirements, and decision-making thresholds, it reduces ambiguity and enhances efficiency. This structured approach enables ISSN (ONLINE):- 2584-1106 Website: www.the lawway with lawyers.com Email: thelawwaywithelawyers@gmail.com shareholders to navigate through complex issues, make informed choices, and collectively steer the company toward its goals. Navigating the Dynamic World of Corporate Enterprise In today’s fast-paced and ever-changing business landscape, adaptability is key to survival. A shareholder agreement equips your company with the necessary tools to adapt and thrive amidst uncertainties. For example, it may outline mechanisms to address unforeseen contingencies like the entry of new investors or changes in ownership structure. By proactively addressing potential challenges, the agreement ensures stability and resilience within the organization A shareholding agreement is essentially more than just a legal document; it is an agreement