We have developed a put and call option agreement on the contractor`s actions. A put option is most often requested by a financial investor as a way to withdraw from the investment in the event of a specific trigger event. Investors may also require that this provision be protected from reputational risks when the company`s activities are controversial, or to avoid commitments under money laundering legislation, etc. The method used to determine the purchase price for the exercise of the put option will be the subject of important negotiations. It is important to consider the judgment in the case of Shakthi Nath – Others vs Alpha Tiger Cyprus Investment Ltd – Others , in which certain investment companies granted a put option in the exercise of the shareholder contract if the following conditions were not met by the “long-standing reference”. The exit price was set at the amount invested, plus an after-tax IRR up to 19% of the amount invested. The H.C found that, in the duty, the respondents did not want to impose the put option, but were seeking damages for breach. The petitioners were therefore bound by the contractual terms they entered into and the arbitrator`s award was upheld. A put option has become a popular exit option in business practice and has resulted in the put option clause in the shareholders` pact and the share subscription agreement. This right of sale is not conferred by law on the shareholder, but by the creation of a contractual agreement between the parties. Therefore, if no option to sell is provided, the investor or shareholder cannot exercise this right of sale. Put Options on shares of a private company is legal when granted to an Indian investor.
If the investor is a foreigner or an NRI, then the minimum warranty of the exit price is at odds with the RBI guidelines. The legality of the clause can only be questioned by the fact that a contract allowing the investor to sell the shares to the developer at a later fixed counterparty is equivalent to a futures contract prohibited by the Securities Regulation Act of 1956. A “Put Option Clause” is often used in a shareholder pact. In general, the shareholders` pact defines the rights and obligations of shareholders, as well as the way in which the company is governed. An option clause in the shareholder contract defines the rights and obligations of shareholders for whom the investor has the option to “seize” the shares or put them on the table. This requires the founders to buy or sell the shares at a predetermined price. If the impasse is not resolved, the only option may be to remove one of the parts of the joint venture. This could be done in different ways: in this context, the basic mechanisms at its disposal would be the right to exercise a sale/call option and the right to resell the minority stake to a sale to a third-party buyer (a deduction). In addition, it should establish a secure protection basket in the form of pre-emption rights (at the time of transfer and on the issue) and establish clearly defined rules of delegation to ensure that minority participation cannot be transferred to a third party without its consent. Shareholder 1 wishes to remain a shareholder in the company only if the company achieves a fixed turnover after five years; If this is not the case, Shareholder 1 wants to withdraw.
An option-to-sell clause in the shareholder contract gives that shareholder the right to request, at his choice, that the entity repurchase the shares at a predetermined price or according to a predetermined formula.