The above parties are hereinafter jointly referred to as “parties” and individually a “party” to the following shareholders` agreement (the “Shareholders` Agreement”) relating to the ownership of the parties to COMPANY NAME, VAT number, a company registered in accordance with the laws of the country (hereinafter the “Company”). 1.4 The parties undertake not to conclude contracts or to enter into commitments of any kind likely to prevent compliance with the provisions of this shareholders` agreement. Automatic transfers are usually triggered when a shareholder dies; is convicted of a crime; dissolved or liquidated (if the shareholder is a corporation); declaration of insolvency; has terminated its employment relationship with the company (if the shareholder is also an employee); substantially violates the SHA; significantly violates other above-mentioned ancillary agreements that could harm the company; or, among other things, a breach of an obligation to the company. Shareholders can determine which acts or omissions trigger an automatic transfer and, as long as the SHA is clearly defined, they are binding. Put options in ASAs give a shareholder the right, but not the obligation, to resell their shares to the company (or other shareholders) on a future date or at one or more specific events. Investors who want to be able to leave a company prematurely because it does not generate certain income on a given date often need a put option. A sell option may stipulate that a shareholder may resell all or part of his or her shares to the corporation (or other shareholders). With respect to put options, the entity or the remaining shareholders may not have the means to redeem the shareholder exercising the put. One of the ways to mitigate this problem if there is to be a put option is to indicate that payments can be made in instalments, and until full payment, Put shares are held in trust. In this case, it would be important to indicate who will have the voting rights on the shares in the fiduciary service. For greater clarity, a shotgun clause requires a shareholder to submit an offer to another shareholder, which, in turn, triggers reciprocal purchase or sale rights. A put and call option indicates a price or a clear way to determine a price, while a shotgun clause allows the supplier to set a price.
In addition, an option must have a clear exercise trigger, whether it is a date or an event, while a shotgun clause can only be invoked by an offer to buy or sell. Full Ratchet Anti-Dilution, a form of economic dilution protection, gives an investor the right to buy shares at the new lower price/valuation and offers the greatest protection for investors, but is most restrictive when there will be multiple rounds of fundraising. The merger or acquisition of the company normally triggers a towing right, as buyers usually seek to fully control a business….