NBFC Shareholders Agreement |
Posted: July 31, 2018 |
An NBFC is a company which is engaged in the business of loans and advances and acquisition of the different type of securities issued by the government. It is a type of company which is incorporated as per the companies act, 2013 and which has to obtain the license from RBI in order to start its operations as per section 45-IA of the RBI act, 1934. RBI issues time to time directions for NBFCs. In Non-Banking Financial Company there are shareholders as well as subscribers. Shareholders are the true owners of the company as they contribute capital and they must execute an agreement with the company to efficiently carry out the operations of the company related to finance activities. Shareholders agreement describes the rights and liabilities of the shareholders. Why there is a need for executing Shareholders Agreement? Shareholder’s agreement is mainly executed in order to resolve disputes among the shareholders and the company as we can’t say that no dispute will arise in future. To maintain a healthy relationship between the shareholders and the company, shareholders agreement helps us in a great way. It is also helpful in investment protection which is made by the shareholder. For shareholders, rules & regulations are laid down under the shareholder agreement. It is very necessary to regulate the terms for the shareholders of a company. While drafting an agreement it should be kept in mind that there is a difference of opinion of every person or they may or may not agree with the opinion of each other on the subject matter concerned. What will be the elements of shareholders agreement? The following must be considered while drafting Shareholder’s agreement in NBFC:
What are the basic features of shareholders agreement? 1. Shareholders Consent There are circumstances and situations where the shareholder’s consent is required in majority matters. In the following below-mentioned matters, shareholders consent is necessary: At the time of the appointment of member i.e.; manager, any member of the supervisory board is appointed;
2. Dispute Resolution We cannot say that disputes will not arise while making an investment in a company. Therefore, the company should prepare itself for such disputes that may take place in future. It is not necessary that disputes will be internal but it may also with the rival company or competitive company. For resolving issues with the shareholders, out of court settlements are preferred by the companies such as arbitration or conciliation between the company and shareholders. 3. Share transfer restrictions There are a set of rules regarding the share transfer in shareholder’s agreement under which shares can’t be easily transferred. There will be a rule that a written consent has to be taken by the existing shareholders for share transfer. However, this rule shall not apply in such a case where a member of a company dies as after the death of the member shares are transferred to the legal representatives/heir in a family. 4. Buy-out Rights There will be a clause in Shareholders’ agreement regarding the buy-out rights which will state that in case shareholder is found incompetent due to certain circumstances such as death, disability, bankruptcy or marital dissolution, then the company or the existing shareholders of the company is eligible to buy the shares of such shareholder. There will also be a clause naming “expulsion” under which any undesirable shareholder can be expelled by the existing shareholders and they can also acquire his/her shares. What are the things which must be considered while drafting a shareholder’s agreement?
The above-mentioned points are not enough but there are some other points also which should be kept in mind. One should contact a professional for a detailed analysis, who might help in drafting the same. Conclusion To protect the interest and to save the company from losses, shareholder’s agreement should be executed. Key provisions must be considered while drafting a shareholder’s agreement and to create a balance between the interest of the shareholder and the interest of the company.
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