A subcontract is a kind of share offering document. Shareholders` agreement – The shareholders` agreement is the agreement between the company and the shareholders. It can be drafted between a specific part of the shareholder and the company or any shareholder of the company. The shareholders` agreement describes the rights and obligations of shareholders, regulates the sale of shares, protects shareholders (especially minority shareholders) and the company on how the company`s important decisions will be made and how it will operate. The appointment of directors and quorum requirements, the definition of matters requiring special decision-making or the granting of veto rights to certain shareholders, the financial needs of the company, the restrictions of the right, the free transfer of shares, the definition of the obligation of each of the shareholders towards the company. A share subscription contract defines the mechanisms of the investment and specifies that the share subscription contract is a contract concluded between the company and the subscriber to the new shares issued by the company. If a company wants to issue new shares of the company, it goes for a share subscription contract. The most important point we need to take into consideration when we talk about the share subscription agreement is that when a company issues new shares, it can lead to the dilution of the share of shares already held by shareholders. In the event that a new investor intends to invest, the entity may issue shares to the new investor for the purpose of equal or higher valuation, subject to the agreement of the existing investor for the issuance of new shares and for the waiver of their subscription rights.
But what if a new investor says 100 shares at Rs40? In this case, the valuation of the company falls under the rule 600×40 = RS24.000. The new investor had invested for a much higher valuation and will therefore remain in a position of economic stability. In such a situation, new securities would have to be issued to it, so that its reference price for the company`s stock again adjusts to Rs 40 (from the much higher price of Rs 60 it paid). The main difference between a share purchase agreement and a share subscription agreement is that, in a share purchase agreement, the consideration is credited to the account of the seller of the share (who is usually an investor or promoter of the company) who wishes to sell his stake in the company. Whereas, in the case of a share occupancy contract, the consideration paid by the purchaser of the shares is credited to the company`s account, with the company issuing additional shares at a predetermined price. A share purchase agreement is a faster method of acquiring the stake in the company compared to the share subscription agreement. The share purchase agreement also does not entail dilution on the part of the company`s existing shareholders. . . .