A Stock Redemption Agreement is a crucial document used when an Indian company wishes to buy back its shares from existing shareholders. This agreement becomes necessary in various scenarios, such as exit of minority shareholders, reduction of share capital, or implementation of employee stock ownership plans. The document must comply with the Companies Act, 2013, particularly sections 68 and 69 regarding share buy-backs, as well as relevant SEBI regulations for listed companies. The agreement typically includes detailed provisions about the redemption price calculation, payment mechanisms, tax implications, and completion procedures. It's particularly important for private companies managing their shareholding structure and ensuring smooth transition of ownership while maintaining legal compliance with Indian corporate laws.
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1. Parties: Identifies the company and the selling shareholder(s) as parties to the agreement
2. Background: Explains the context of the redemption, including the company's authority to redeem shares and the shareholder's ownership
3. Definitions: Defines key terms used throughout the agreement including 'Shares', 'Redemption Price', 'Completion Date', etc.
4. Agreement to Redeem: Sets forth the basic agreement for the company to redeem and the shareholder to sell the specified shares
5. Redemption Price: Specifies the price per share and total redemption amount, including calculation method
6. Completion: Details the closing process, including timing, delivery of share certificates, and payment procedures
7. Representations and Warranties: Standard warranties from both parties regarding authority, ownership, and absence of encumbrances
8. Tax Matters: Addresses tax implications and responsibilities related to the redemption
9. Confidentiality: Requires parties to maintain confidentiality of the agreement and transaction details
10. Governing Law and Jurisdiction: Specifies Indian law as governing law and sets jurisdiction for disputes
11. General Provisions: Standard boilerplate clauses including notices, amendments, and entire agreement
1. Installment Payments: Include when redemption price is to be paid in installments, detailing payment schedule and terms
2. Security: Include when installment payments are secured by collateral or guarantees
3. Right of First Refusal: Include when other shareholders have rights to purchase before company redemption
4. Regulatory Compliance: Include for listed companies or when specific regulatory approvals are required
5. Foreign Exchange Provisions: Include when foreign shareholders are involved, addressing FEMA compliance
6. Tag-Along Rights: Include when other shareholders have right to participate in the redemption
7. Non-Compete and Non-Solicit: Include when selling shareholder is/was involved in company management
1. Schedule 1 - Share Details: Details of shares being redeemed including share certificate numbers, class, and distinctive numbers
2. Schedule 2 - Calculation of Redemption Price: Detailed methodology and calculations for determining the redemption price
3. Schedule 3 - Completion Requirements: Checklist of documents and actions required for completion
4. Schedule 4 - Board Resolution: Copy of board resolution authorizing the share redemption
5. Schedule 5 - Regulatory Approvals: Copies of required regulatory approvals or compliance certificates
6. Appendix A - Share Certificates: Copies of relevant share certificates to be cancelled
7. Appendix B - Payment Schedule: If applicable, detailed schedule of installment payments
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