SESSION 11

M & A CONTRACTS
 MERGERS AND ACQUISITIONS
• Mergers and acquisitions (M&A) is a general term that describes the consolidation of
companies or assets through various types of financial transactions, including mergers,
acquisitions, consolidations, tender offers, purchase of assets, and management
acquisitions.

• A merger takes place when two separate entities combine forces to create a new, joint
organization.

• An acquisition refers to the takeover of one entity by another.

 PURPOSES OF M&A CONTRACTS

• It communicates in clarity the terms and conditions of one company to another.

• It specifies the prices of assets and make price adjustments.

• It helps perform process management functions to ensure a smooth consolidation or

takeover.
 STRATEGIES FOR ACQUISITION
• ACQUISITION STRATEGY - Finding a methodology for the acquisition of target companies that generates value for the
acquirer. This can keep a management team from buying businesses for which there is no clear path to achieving a
profitable outcome. The management team must have a specific value proposition that makes it likely that each acquisition
transaction will generate value for the shareholders. Some of these value propositions (strategies) are as follows.
• Adjacent Industry Strategy - An acquirer may see an opportunity to use one of its competitive strengths to buy into an
adjacent industry. This approach may work if the competitive strength gives the company a major advantage in the adjacent
industry.
• Diversification Strategy - A company may elect to diversify away from its core business in order to offset the risks
inherent in its own industry. These risks usually translate into highly variable cash flows which can make it difficult to
remain in business when a bout of negative cash flows happen to coincide with a period of tight credit where loans are
difficult to obtain.
• Full - Service Strategy - An acquirer may have a relatively limited line of products or services and wants to reposition
itself to be a full-service provider. This calls for the pursuit of other businesses that can fill in the holes in the acquirer’s
full-service strategy.
• Geographic Growth Strategy - A business may have gradually built up an excellent business within a certain geographic
area and wants to roll out its concept into a new region. This can be a real problem if the company’s product line requires
local support in the form of regional warehouses, field service operations, and/or local sales representatives. Such product
lines can take a long time to roll out, since the business must create this infrastructure as it expands. The geographical
growth strategy can be used to accelerate growth by finding another business that has the geographic support characteristics
that the company needs, such as a regional distributor, and rolling out the product line through the acquired business.
 STRATEGIES FOR ACQUISITION
• Industry Roll-Up Strategy - Some companies attempt an industry roll-up strategy, where they buy up a number of smaller
businesses with small market share to achieve a consolidated business with significant market share. In order to create any
value, the acquirer needs to consolidate the administration, product lines and branding of the various acquirees, which can
be quite a chore.
• Low-Cost Strategy - In many industries, there is one company that has rapidly built market share through the unwavering
pursuit of the low-cost strategy. This approach involves offering a baseline or mid-range product that sells in large volumes,
and for which the company can use best production practices to drive down the cost of manufacturing. It then uses its low-
cost position to keep prices low, thereby preventing other competitors from challenging its primary position in the market.
This type of business needs to first attain the appropriate sales volume to achieve the lowest-cost position, which may call
for a number of acquisitions. Under this strategy, the acquirer is looking for businesses that already have significant market
share, and products that can be easily adapted to its low-cost production strategy.
• Market Window Strategy - A company may see a window of opportunity opening in the market for a particular product or
service. It may evaluate its own ability to launch a product within the time during which the window will be open and
conclude that it is not capable of doing so. If so, its best option is to acquire another company that is already positioned to
take advantage of the window with the correct products, distribution channels, facilities, and so forth.
• Product Supplementation Strategy - An acquirer may want to supplement its product line with the similar products of
another company. This is particularly useful when there is a hole in the acquirer’s product line that it can immediately fill
by acquiring.
 STRATEGIES FOR ACQUISITION
• Sales Growth Strategy - One of the most likely reasons why a business acquires is to achieve greater growth than it could
manufacture through internal growth, which is known as organic growth. It is very difficult for a business to grow at more
than a modest pace through organic growth, because it must overcome a variety of obstacles, such as bottlenecks, hiring the
right people, entering new markets, opening new distribution channels, and so forth. Conversely, it can massively accelerate
its rate of growth with an acquisition.
• Synergy Strategy - One of the more successful acquisition strategies is to examine other businesses to see if there are costs
that can be stripped out or revenue advantages to be gained by combining the companies. Ideally, the result should be
greater profitability than the two companies would normally have achieved if they had continued to operate as separate
entities. This strategy is usually focused on similar businesses in the same market, where the acquirer has considerable
knowledge of how businesses are operated.
• Vertical Integration Strategy - A company may want to have complete control over every aspect of its supply chain, all
the way through to sales to the final customer. This control may involve buying the key suppliers of those components that
the company needs for its products, as well as the distributors of those products and the retail locations in which they are
sold.
• Replacement Cost Strategy - Replacement cost is the price that an entity would pay to replace an existing asset at current
market prices with a similar asset. It can be used to estimate the amount of funding that might be required to duplicate
another business. It could help establish one of several possible price points that can be used in the formulation of a
proposed price to pay the shareholders of a target company as part of an acquisition.
 WHY OPT FOR EQUITY SHARES
 Diversification: One can invest in multiple stocks. Equity offers diversification such as different sectors, asset classes, etc.

 Ownership - One gets ownership of the company and can exercise control by exercising one’s voting rights in the
company.

 Higher Returns - The primary advantage of investing in equity is that it can generate high returns in a short time in
comparison to other investment options like Bank FDs. Such wealth creation not only works through capital appreciation
of such securities, but also high dividend earnings received by individuals.

 Limited liability - There is always a risk of adversity when it comes to companies such as bankruptcy or operational
losses. However, your liability as a shareholder or investor is restricted to the amount of investment made.

 Liquidity - Stocks are generally considered liquid assets. The shares can very easily transfer ownership.

 Beat inflation - Inflation is one of the major constraints to wealth creation. The rate of return on your investment should
ideally be higher than the inflation rate. The inverse case would result in wealth erosion. Investing in equities allows you
to earn a high return rate that can potentially beat the inflation rate by a large margin, thereby facilitating wealth creation
in the long term.
 WHY OPT FOR EQUITY SHARES
 Protection by SEBI - SEBI has been instrumental in reducing the advent of fraudulent activities by companies or
individuals.

 Right shares and bonus shares - When a company requires additional capital, it can issue rights shares. A right issue
ensures the preservation of ownership and control of existing shareholders, and they receive priority to invest, over other
investors. Right shares are issued at a price lower than the market price of the company’s share. So, existing investors can
take up this advantage or otherwise renounce such rights. Sometimes companies decide to issue bonus shares to their
shareholders. Bonus shares are essentially free shares that are given to existing shareholders. Often, bonus shares are
issued instead of dividends.

 Tax advantage - Equity investments offer tax benefits. Long-term capital gains (LTCG) up to Rs. 1 lakh from equity
investments are exempt from tax. Otherwise, LTCG of above Rs. 1 lakh is taxed at 10%. Short-term capital gains (STCG)
from equity investments are taxed at 15%. The return earned on debt or gold invites a higher tax obligation than equities
do.
FACETS TO CONSIDER WHILE INVESTING
• INVESTMENT STRATEGY

• Value Investing: Investing in undervalued company compared to their peers hoping the same would generate gains.

• Growth Investing: Investing in shares that display market-beating growth in terms of revenue and earnings.

• Income Investing: Investing in quality stocks that pay significant dividends. These dividends generate income that
can be used or reinvested for increasing earnings potential.

• FUNDAMENTAL RATIOS TO BE STUDIED

• Price - Earnings Ratio - The stock’s price is compared with the company’s earnings per share (EPS). E.g.: If a
company is trading at Rs. 20 per share that produces EPS of Rs. 1 annually, then its P/E ratio is 20 which means that
the share price is 20 times the company’s earnings on an annual basis.

• Debt - Equity Ratio - It helps determine how much the company is in debt. High levels of debt are bad as it signals
bankruptcy.

• Price - Book Value Ratio (P/B Ratio)- This ratio compares the stock’s price to the net value of assets that are owned
by the company, and then divided by the number of outstanding shares.
FACETS TO CONSIDER WHILE INVESTING
• Performance: It is important to analyze the performance of the share in the past to get a better idea regarding its growth.

• Shareholder Pattern: It is vital to check the shareholding pattern of a company. Investors should preferably invest in

companies having a high promoter holding since most promoters work closely with a company's management, and due to

the amount of stake they have, they tend to have a significant say in the management decisions too. This means that

promoters have the best view of how the company is running. Considering that, promoters holding a higher stake could be

seen as a good sign for investors. Furthermore, since the promoters also will lose money if the company's stock price goes

down, investors tend to have more confidence to invest if the promoter's stake is high.

• Dividend History: This analysis is especially vital for people whose investment strategy is income investment.

• Revenue Growth: This can be determined by checking both its revenue and its earnings.
 INSTRUMENTS – SHARES
(EQUITY & PREFERENCE)
EQUITY SHAREHOLDERS PREFERENCE SHAREHOLDERS • Add-on Benefits for Investors -
Shareholders are allowed to trade in their
• Equity shares receive capital appreciation • Dividends are paid first to preference
convertible shares for a pre-decided number
shareholders - Preference shares have a
• Eligible to receive bonus shares against
of common shares. If the company is able to
fixed dividend. This payout is typically
their existing holdings.
meet a specified profit mark that was
done prior to any dividends being paid to
• Have voting rights, and as a result, they determined earlier, then the shareholder has
common shareholders.
participate in the management decisions. the opportunity to experience add-on
• Preference shareholders have a prior
dividends. This can be an advantageous
• Highly liquid, traded on the stock market.
claim on business assets - If the business
prospect, especially if the value of common
decides to file for bankruptcy or liquidates,
shares starts increasing.
preference shareholders can get a prior
claim in comparison to the equity
shareholders.
REASONS TO INVEST IN VARIOUS KINDS OF
PREFERENCE SHARES
CUMULATIVE PREFERENCE SHARES NON - CUMULATIVE PREFERENCE SHARES

• Arrears in dividends get accumulated and are paid when the company • Dividend rate of return is higher than Cumulative preference shares.
decides to pay out dividends.

• Paid before Non - Cumulative preference shares

PARTICIPATING PREFERENCE SHARES NON - PARTICIPATING PREFERENCE SHARES

• Participating stocks give the right to partake in surplus profit during • The purchase price of Participating shares are usually higher than that
liquidation once the company has paid other shareholders, thereby of Non - Participating Preference Shares.
receiving a fixed rate of dividend and a share in the company’s extra
earnings.

CONVERTIBLE PREFERENCE SHARES

NON - CONVERTIBLE PREFERENCE SHARES
• Receives more dividend than equity shares.
• Usually, Dividend yield is higher as compared to Convertible
• Option to convert is more valuable if the price of equity share
Preference shares.
increases, thereby giving investor the opportunity to participate in
equity shares if he/she wishes to.

• Carries lesser risk than equity shares.

STRUCTURE OF M&A CONTRACTS

M&A contracts are divided into sections or articles, each containing different

information. Sequentially, these articles consist of:

1. ‌Parties and recitals 6. Termination provisions

2.‌Price, currencies, and structure 7.‌Indemnification

3.‌Representations and warranties 8.‌Tax

4.‌Covenants 9.‌Defined terms and conditions

5.‌Conditions 10. ‌Miscellaneous clauses

 SHAREHOLDER AGREEMENT
It is an arrangement among the shareholders of a company. It contains provisions regarding the operation of the
company and the relationship between its shareholders.

PURPOSE –

1. It protects both the corporate entity (describes how the company will be operated and the manner in which
significant decisions will be made) and the shareholders’ investment (outlines what their rights and obligations are
and how the shares can be distributed or sold) in that entity.

2. A shareholders’ agreement can protect minority shareholders. Such can be done by incorporating provisions to
reduce the risks attached to the shareholding by including protections via the use of the right to veto key decisions
such as review of regular management accounts, substantial expenditure, sale or winding up of the business, etc.
 SHAREHOLDER AGREEMENT
• STRUCTURE –

• There are basic components that every shareholder’s agreement contains. Examples include the number of shares
issued, the issuance date, and the percentage of ownership of shareholders.

• A pre-emption provision present ensures the current shareholders have access to new shares before they can be issued
to other potential shareholders.

• It also covers details about dividend payments and the distribution of earnings, business operation, etc. It contains
provisions about the frequency of board meetings and the appointment or resignation of directors. It also outlines how
the processes will be for different levels of decision-making. It often also includes competition restrictions and a deed
of adherence. The competition and restrictive covenants prevent a shareholder from competing with the company.
 SHAREHOLDER AGREEMENT
HTA EMPLOYEES UNION (REGD.) V. HINDUSTAN THOMPSON ASSOCIATES
CITATION: 2013 SCC OnLine Del 3000.
FACTS: In 1973, the Company suffered a financial crises and was on the verge of liquidation. The members of the staff of the Company, both management and
non-management, decided to salvage the Company and to make it a 100% staff owned Company and took steps in the said direction and bought all the equity
share capital of the Company and all the employees of the Company from top to bottom became employee shareholders under a joint venture of management
staff and non-management staff of the Company by executing a Memorandum of Settlement whereunder the equity shares of the Company were to be held by
the management and the non-management staff in the ratio of 65:35 and the understanding was also duly incorporated in the Articles of Association of the
Company and the shares held by the employee, on death, promotion, resignation or retirement of the employee, were transferred to maintain the said ratio. The
management of the Company offered 49% of the equity to the foreign company, J. Walter Thompson Holdings Ltd. The remaining 51% equity capital of the
Company was to be held by the employees of the Company in the same ratio of 65:35 between the management and the non- management staff. Subsequently,
the foreign Company acquired 11% more equity shares in the Company, and it was simultaneously proposed by the Board of Directors of the Company that the
remaining 40% equity shares held by the employees of the Company be transferred to a separate new holding Company to consolidate those shares in one
common entity. The appellant being a Union of non-management staff of the Company subsequently learnt that the shares of many employees who had retired
or resigned were available for transfer to the non-management staff in accordance with the legal obligation to maintain the ratio of 65:35 and though written
assurances had been given by the respondents/defendants to the appellant/plaintiff in this regard but the same was not done. In fact, the said shares were
allocated to the management staff and thereafter sold to the foreign company thereby the respondents had breached the obligation to maintain the ratio of 65:35
in the remaining 40% equity capital of the Company held by its employees.
ISSUE: Whether the agreement regarding shareholding will be valid?
HELD: The Court observed that though the settlement/arrangement/agreement between the parties was earlier incorporated in the Articles of Association of the
Company . However, by amendment in 1998, the said part of the Articles of Association was deleted. It was held by the Delhi High Court that as the terms of the
AoA were amended, the claims of such breach cannot be upheld.
 SHAREHOLDER AGREEMENT
BAJAJ AUTO LTD. V. WESTERN MAHARASHTRA DEVELOPMENT CORPORATION LTD.
CITATION: 2015 SCC OnLine Bom 2111.
FACTS: By virtue of a protocol agreement entered by Bajaj and WMDCL, Maharashtra Scooters Limited (MSL) was incorporated. Bajaj and WMDCL
respectively held 24% and 27% shares in MSL, while the remaining 49% of the equity shareholding was held by the public. Clause 7 of the Protocol Agreement
provided for a right of pre-emption to Bajaj and WMDCL. In 2003, WMDCL considered selling and transferring its 27% shareholding to Bajaj at a price of INR
232.20 per share. Bajaj confirmed its interest in buying WMDCL’s shareholding in MSL but did not find the price offered per share as acceptable. It requested a
meeting by High Level Committee to reach a settlement regarding purchase rate of WMDCL’s shares held in MSL. After failure in consensus despite several
communications between parties, a joint reference was made to the Arbitrator on December 29, 2003. The Arbitrator passed an award, wherein it was held that
the equity shares of WMDCL in MCL are to be sold at a price of INR 151.63 per share to Bajaj. WMDCL challenged the Award of the Arbitrator under Section
34 of the Arbitration and Conciliation Act, 1996 before the Bombay High Court. The Single Judge of the Bombay High Court negated all the contentions made
by WMDCL except the one challenging the legality of Clause 7 of the said Protocol Agreement. The Single Judge of the Bombay High Court upheld WMDCL’s
contention regarding Clause 7 being invalid and held this to be the sole ground to set aside the Award. The order of the Single Judge of the Bombay High Court
was challenged before the Division Bench of the Bombay High Court by Bajaj.
ISSUE: Whether Clause 7 of the Protocol Agreement is considered valid and enforceable in nature?
HELD: Shares of a company are movable property and the right of the shareholder to deal with his shares or enter into contracts in relation thereto and have a
pre-emption clause is nothing but a shareholder exercising his property rights. There is no provision to curtail the rights of the shareholders to enter into a
consensual arrangement with a purchaser in relation to their specific shares. Further, if the legislature intended to take away the right of shareholders to enter
into consensual arrangement with the purchaser in relation to their specific shares, it could have made an express provision in that regard. The fact that the
shares of a public company can be subscribed to by the public, unlike a private company, does not in any way whittle down the right of a shareholder of a public
company to arrive at a consensual arrangement with a third party or another shareholder which is in conformity with the Act. Clause 7 of the Protocol
Agreement which is incorporated in the Articles of Association of MSL sets out the relationship between Bajaj and WMDCL. It is not a blanket pre-emption
clause which binds all the shareholders of MSL to sell their shares only to other members of MSL, which is found in a private company. Clause 7 does not in
any way whittle down the rights/ liabilities of other members of MSL. The Division Bench of Bombay High Court further stated that even if the terms of a
private arrangement between shareholders were not permissible under the AOA of a company, it would not in any way destroy the enforceability of the
agreement between the shareholders. The Hon’ble Court, thereby, held that Clause 7 of the Protocol Agreement was valid.
 SHARE TRANSFER AGREEMENT
• It is a legal document used to transfer the ownership of shares of stock. The party transferring shares could be a person or a company. This
agreement type is usually entered into by a buyer and a seller where the seller wishes to sell a specific number of shares to the buyer for an
agreed upon price. The shares transfer agreement specifies the terms and conditions of the sale.

• The Transferor transfers the title of the shares to the Transferee in consideration of the amount 'Specified in the Transfer Price'. The transfer is
absolute and includes all the rights to capital, voting rights, dividends of the shares. The Transferor will transfer the shares to the Transferee on
the effective date.

• In accordance with Section 56(1) of the Companies Act, 2013 every instrument of transfer with the date of its execution specified thereon
shall be delivered to the company within 60 days from the date of such execution. Therefore, the transfer deed is valid for 60 days of
execution, after which the company will not process the share transfer and the share transfer will not be successful.

• The Securities Exchange Board of India states that every listed company is required to issue its shares in dematerialized form. Rule 9A of the
Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018 states that every unlisted public company is required to
issue its securities only in dematerialized form and take all necessary actions to facilitate dematerialisation of all its existing securities in
accordance with the provisions of the Depositories Act, 1996 and regulations made thereunder.

• Under a clarification issued by SEBI, Post 01st April 2019, If a person wants to transfer/sell shares held in physical form, the same can be
done only post dematerialization of shares.
 SHARE TRANSFER AGREEMENT
• STRUCTURE –

• Sale and Purchase of the Sale Shares – Outlines the number of shares being sold to the buyer, the price of the shares, manner and
timeline for payment. Such timeline is present as there are obligations (such as approvals, intimations, etc. that need to be sought by
the buyer and seller from third parties) which the parties need to fulfil before the shares can be transferred, hence the payment and
transfer of shares usually does not take place on the same date as when the Share Transfer Agreement is entered into.

• Representations and warranties - It is an assertion of facts made on a specific date to persuade the other party to enter into an
agreement. The company and the seller give representations and warranties about the business of the company and its dealings. Other
representations and warranties would cover any disputes, litigations, tax status, and any other specific representation or warranty
depending upon the business of the company and the need of the buyer. The buyer provides representations about its ability to
purchase the shares of the company and carry out other actions contemplated under the agreement. It is given till the date of closing.
It is important to cap the validity date of the same. They help protect a party against the other in case the assertions made by them turn
out to be false because of which the transfer is not carried out. Representations and warranties are safeguarded by the indemnity and
the termination clause in an agreement.
 SHARE TRANSFER AGREEMENT
• STRUCTURE –

• Pre-Closing Covenants - During the time period ranging from the execution of the Agreement to the actual transfer of the shares, the
sellers would still be carrying out the business of the company. However, the value of the shares would have been decided beforehand
based on the books of the company, yet, the company in the normal course of business would be using its assets and incurring
liabilities. To ensure that the position of the company in the interim period does not differ, pre-closing covenants are built into the
Agreement. This clause sets out the actions that would be permitted to be carried out by the company in the ordinary course of business.
The buyer shall fix the actions that can be carried out freely by the company without requiring its approval. Further, the buyer can cap
the monetary value for transactions. This way major decisions and actions which would create a future liability and obligation on the
company would require the buyer's approval and in turn the buyer would be informed about actions that would affect the value of the
company. Any action taken in contravention of this clause would attract the indemnity and termination clause of the agreement.

• Indemnification – This clause specifies the liability for losses incurred by a party due to breach of any representation and warranty,
covenant or obligation under the agreement. It may provide for an exclusive or non-exclusive remedy for claims. It further specifies the
manner in which claims can be brought forth by either party, the time period, exclusions and limitations on claims.
 SHARE TRANSFER AGREEMENT
• STRUCTURE –

• Conditions Precedent and Closing Conditions - Conditions precedent are all actions that are required to be carried out by both the
parties before the actual transaction of sale of shares occurs. For the seller, these conditions culminate out of the due diligence carried
out by the buyer. This clause is very important from the buyers perspective as there may be circumstances wherein a lender of the
company may have placed a restriction on the sale of shares, which would have to be resolved with the lender before such a
transaction goes forward. Further, depending upon the business of the company, approvals, authorizations, permissions, etc. may also
be required from third parties. This is just a general summation and would actually depend on a case to case basis and the due
diligence carried out. The party would inform the other party upon completion of these conditions, post which, the parties would go
forward with the sale. If these actions are not carried out within the specified time period or to the other party's satisfaction, the other
party may seek termination of the Share Transfer Agreement due to lapse of time.

• Post Completion Actions - Even after the sale of shares is completed, there may still be actions which would be required to be carried
out based on the agreement between parties. These vary from disposing off any pending litigation against the company to transferring
documents in favour of the buyer. All of these actions can only be achieved once the transfer of shares is completed successfully. The
parties need to clearly identify such actions and carry them out post transfer. These actions are safeguarded by the indemnity clause.
 SHARE SUBSCRIPTION AGREEMENT
A subscription agreement is a formal agreement between a company and an investor to buy shares of a company at an agreed-upon price.
The subscription agreement contains all the required details.

PURPOSE – It is a useful document as it will clearly record the terms on which a person (the subscriber) agrees to subscribe shares from
the company.

STRUCTURE –

1. Conditions Precedent Clause: A condition precedent is a legal term describing a condition or event that must come to pass before a
specific contract is considered in effect or any obligations are expected of either party.

2. Representation and Warranties: That the subscriber represents that he has received all the relevant information and all the relevant
documents of the company where he is investing. The subscriber can even ask to meet financial commitment and meet their
obligations under the agreement. The investor also shall make a specific demand if there is any for what they want to be represented.
The warranty clause is very wide as it contains all the information provided by the directors and members of the company is true in
every sense and all the information delivered to the investor is correct. This clause can also include the warranty that the company
owns license or other IPR.

3. Subscription: This clause shall lay don the number of shares subscribed and at what price.
 SHARE SUBSCRIPTION AGREEMENT
4. Term Sheet: The inscription laid out in the term sheet is jotted down here to give it the final touch. The terms in the term sheet
outline the agreed “conditions” for an investment. The conditions would involve terms like, Investment amount, Pre-money
valuation, and Post money valuation
5. Conversion right: This right means that there may be a right to convert the shares of preferred stock into the shares of common stock.
This right is not mandatory but optional.
6. Right of First Refusal: This clause shall state that at the time when the investor is willing to sell its shares, then the company shall be
invited first to purchase the shares and only when the company denies to buy the shares, the investor shall sell such share to outsiders.
7. Duration of the Stake: Minimum duration of the stake to be held by the investor.
8. Exit Rights: This clause shall state the exit right in case of breach of terms and conditions.
9. Indemnity: Any of the party will indemnify the other party against any losses, claims, costs, liabilities, damages occurred if any party
is in breach or damages occurred because of inaccurate information in the warranties and representation clause.
10. Termination: By the mutual consent of both the parties.
• By the company - if the investor fails to pay for the share subscription on the completion date or if an investor breaches any
terms and conditions of the agreement.
• By the investor - if the company fails to provide condition precedent or any breach committed by the company, any adverse
change occurs before the completion date.
DIFFERENCE BETWEEN SHA, STA AND SSA

• Shareholders Agreement is the agreement which is drafted between the company and the shareholders. It can be drafted between a particular

section of the shareholder and the company or every shareholder of the company. 

• Share Transfer Agreement is an agreement that is drafted between the purchaser and buyer of the share. In this the consideration is credited into

the account of the seller of the share who wants to sell his stake in the company. It does not lead to the dilution of the stake of the existing

shareholders of the company.

• Share Subscription Agreement is an agreement that is entered into between the company and the subscriber of the new shares issued by the

company. When a company wants to issue new shares of the company, they go for a shares subscription agreement. The consideration paid by the

buyer of the shares is credited in the account of the Company. It can lead to the dilution of the stake of the shares already held by the shareholders.