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Agreements, Employment Contracts

Employment training bond is an agreement entered by the employee and the employer stating that the employee is required to serve the agreed period, and there are restrictive covenants that subject the employee to pay a said amount for any loss incurred due to voluntary resignation. Well, that’s the brief part of the scenario. Majority of the employable population in India go with a feeling that the agreement is legally valid, and alarmingly employers take a downloadable copy of the agreement from online without any knowledge of the legal validity. The Indian Contract Act, 1872 and various judgments made by High Court and Supreme Court of India govern the aspect of the legality of such employment contracts which will be covered in this blog.

 

Legal enforceability of the Employment  Bonds:

 

  1. Employee by signing a contract of employment does not sign a bond of slavery and therefore, the employee always has the right to resign even if he has agreed to serve the employer restrictive covenants
  2. Restrictive covenants may be considered valid if they are reasonable.
  3. Restrictive covenants have to be proved that these are meant for the freedom of trade.
  4. Agreement must be signed by the parties with free consent
  5. The conditions stipulated in the bond must be reasonable
  6. The conditions imposed on the employee must be proved to be necessary to safeguard the interests of the employer.
  7. Agreement has to executed on a stamp paper of Appropriate value
  8. In the event of breach of contract by the employee, the employer shall be entitled to recover the damages only if a considerable amount of money has been spent on training

 

Real life examples:

 

  1. S. Gobu V The State of Tamil Nadu

Major takeaway: if the employee leaves the service before the stipulated period and has been invested on by the employer, then as per the agreement is bound to pay to the organization for the damages.

 

  1. Satyam Computer Services Limited V Ladella Ravichander

Major takeaway: Though employer showed that it incurred a loss of INR 2L on the employee who abruptly left the job, the  Andhra Pradesh High Court held that such claim by the employer is unreasonable, and after verification gave a judgment that an amount of INR 1L was the reasonable amount which employee would pay the firm.


We at Wazzeer have developed legally enforceable employment contracts which entrepreneurs can use in India. In case you are interested to get access to, then drop your query at “Get Started!” 

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Agreements

Let me give you a real-life example that inspired me to write on this topic, A is a vendor of B and agrees to sell to B thousand pieces of carton boxes every month for B’s logistic service. There were no specifications of the carton boxes in this contract. This agreement is a void one. B had to send series legal notices to B for quality deterioration, but B couldn’t win the case since the agreement was void. In this blog, we will quickly look into different scenarios under which an agreement is considered not a void one, and is legally enforceable.

 

A legally valid Agreement be:

  • it is expressed in writing and registered under the law
  • it is a promise to compensate, wholly or in part, by the parties
  • Agreement should not restrain parties from exercising a lawful profession, trade or business of any kind.
  • Clauses should be certain and understandable
  • Agreement should not restrict parties from enforcing his or her rights

 

To give a couple more instances, where agreement in consideration is void:

  • A promises, for no consideration, to give to B Rs. 10,000. This is a void agreement.
  • A promises to give his son, B, Rs. 10,000. A puts his promise to B into writing and registers it. This is a contract.
  • A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract.
  • A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract.
  • A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract.
  • A agrees to sell a house worth Rs. 1C for Rs. 10L. A’s consent to the agreement was freely given. The agreement is a
  • contract notwithstanding the inadequacy of the consideration.
  • A agrees to sell a house worth Rs. 1C for Rs. 10L. A denies that his consent to the agreement was freely given. The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not A?s consent was freely given
  • A agrees to sell to B a hundred tons of oil. There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.
  • A agrees to sell to B one hundred tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void.
  • A, who is a dealer in cocoanut-oil only, agrees to sell to B “one hundred tons of oil”. The nature of A’s trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of cocoanut-oil.
  • A agrees to sell to B “all the grain in my granary at Ramnagar”. There is no uncertainty here to make the agreement void.
  • A agrees to sell B “one thousand maunds of rice at a price to be fixed by C”. As the price is capable of being made certain, there is no uncertainty here to make the agreement void.
  • A agrees to sell to B “my white horse for rupees five hundred or rupees one thousand”. There is nothing to show which of the two prices was to be given. The agreement is void

 

 

 

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Agreements

In India, from the business registration point of view, under profit generating business kind, there are 5 major business entity types.  There are quite a number of agreements that come into play based on entity type; on the other hand, there are agreements that will come to play as your business grows. This blog will enlighten you with the different kind of Corporate Agreements and contracts that the company would require during fundraising scenario.

 

#1: Shareholders’ Agreement:


Every shareholder, when they trade money for Shares in the company, enters a Shareholder’s agreement.  This contract confers the rights and imposes obligations over and above those provided by company law.

This contract defines rules like:

  • Restrictions on transfer of shares
  • Restrictions on forced transfers of shares
  • Nomination of directors for representation on boards
  • Quorum requirements
  • Veto or supermajority rights


#2: Agreement for underwriting shares of a company:


When the existing shareholders of the company or the public do not subscribe to the securities offered to them, and company decides to allot number of shares to the underwriter who subscribes to the securities.


Underwriting is an agreement, entered into by a company with a financial agency, in order to ensure that the public will subscribe for the entire issue of shares or debentures made by the company. The financial agency is known as the underwriter and it agrees to buy that part of the company issues which are not subscribed to by the public in consideration of a specified underwriting commission.


The underwriting agreement defines rules like:

  • Period during which the agreement is in force
  • The amount of underwriting obligations
  • The period within which the underwriter has to subscribe to the issue after being intimated by the issuer
  • The amount of commission if any

 

#3: Listing Agreement:

Listing means an admission of securities to dealings on a recognized stock exchange. The securities may be of any public limited company, Central or State Government, quasi-governmental and other financial institutions/corporations, municipalities, etc. Listing Agreement is between the company the listing platform.

 

The objectives of listing are mainly to:

  • provide liquidity to securities;
  • mobilize savings for economic development;
  • protect interest of investors by ensuring full disclosures.

 

#4: Share Purchase Agreement:

 

This Agreement comes into play when an individual (generally the equity investor) buys shares from the company.

 

This Agreement lays down rules like:

  • Terms and conditions
  • Rights exercisable
  • Disagreements resolutions criteria
  • Criteria under which sale of the Equity Investor’s shares can take place


Wazzeer has developed packages for startups that have plans to raise funds from internal and external sources, to discuss the same -> “Get Started!”

 

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Agreements

Let’s take a situation here, say there are two organizations- A and B. A enters a contract with B to outsource tech team. The Contract is a well vetted and very much valid contract drafted by an experienced Lawyer. Now, say the contract was breached by Organization B for some reason. In this article, we will look into the solutions that Organization A has, which basically answers our first question ‘What could be the consequence of breaching an Agreement or Contract in India?’

Compensation for loss or damage caused by breach of contract

Organization A who suffers by such breach is entitled to receive from Organization B a compensation for any loss or damage caused.

Compensation for breach of contract where penalty stipulated for

When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, the Organization A complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the Organization B.

Party rightfully rescinding contract, entitled to compensation

A person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfillment of the contract.

Compensation for failure to discharge obligation resembling those created by contract 


When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.


Examples of scenarios where the breach of contract takes place:

  • Firm P contracts to buy of Firm Q, at a stated price, 50 mounds of rice, no time being fixed for delivery. P afterward informs Q that he will not accept the rice if tendered to him. Q is entitled to receive from A, by way of compensation, the amount, if any, by which the contract price exceeds that which Q can obtain for the rice at the time when P informs Q that he will not accept it.
  • Firm P contracts to buy Q’s ship for 60,000 rupees, but breaks his promise. P must pay to Q, by way of compensation, the excess, if any, of the contract price over the price which Q can obtain for the ship at the time of the breach of promise.
  • Firm P contracts to repair Q’s Office in a certain manner and receives payment in advance. P repairs the house, but not according to contract. Q is entitled to recover from P the cost of making the repairs conform to the contract.


In conclusion, if a contract is valid it is enforceable to protect parties that are affected by the breach in some way or the other. We at Wazzeer provide the flexibility to clients by including specific clauses to protect the client from any disputes and as well ensure to provide a guarantee of service.

 

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Acquisitions, Agreements

1. Acquisition of Shares:

 

Acquisitions may be via an acquisition of existing shares of the target, or by subscription to new shares of the target. 

 

 a. Transferability of Shares:

 

Depending upon the entity type, the eligibility and procedure of carrying out this process will change. For instance, maximum membership of private limited company is 200, and transferability of shares is governed by the AoA as guided by the Company Act, 2013. While acquiring shares of a private company, it is therefore advisable for the acquirer to ensure that the non-selling shareholders (if any) waive any rights they may have under the articles of association.

 

In case of a Public Limited Company, Shares are easily transferable. Any transfer of shares, whether of a private company or a public company, must comply with the procedure for transfer under its articles of association.

 

b. Squeeze out procedures:

 

Situations where there is already Contracts held by shareholders of the Transferee company, such sensitive situations guided by specific sections of Company Act, 2013.

  • Section 395 of the CA 1956 – Section 395 envisages a complete takeover or squeeze out without resort to court procedures. Governs when Contracts between shareholders.

 

  • Section 236 of the CA 2013 – Under the CA 2013, if a person or group of persons acquire 90% or more of the shares of a company, then such person(s) have a right to make an offer to buy out the minority shareholders at a price determined by a registered valuer in accordance with prescribed rules.
  • Scheme of the capital reduction under section 100 of the CA 1956 – Section 100 of the CA 1956 permits a company to reduce its share capital in any manner and prescribes the procedure to be followed for the same.
  • Section 186 of CA 2013 provides for certain limits on inter-corporate loans and investments.

 

2. SEBI Regulations

 

If the acquisition of an Indian listed company involves the issue of new equity shares or securities convertible into equity shares (“Specified Securities”) by the target to the acquirer, the provisions of Chapter VII (“Preferential Allotment Regulations”) contained in ICDR Regulations will apply (in addition to company law requirements mentioned above).

 

3. Takeover Code

 

If an acquisition is contemplated by way of issue of new shares, or the acquisition of existing shares or voting rights, of a listed company, to or by an acquirer, the provisions of the Takeover.

 

Merger and Acquisition are two business decisions that have to be securitized up by qualified Lawyer and Accountant. Starting from due diligence till contracts signing, ensuring that nothing is been hidden or executing things smoothly is a task. Wazzeer understands the requirements thoroughly and delivers a well-consulted end to end legal, accounting, and secretarial service to our clients, all you have to do is ->“Get your Wazzeer”

 

 

 

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Agreements

E-commerce laws and regulations in Indian startup ecosystem are still evolving, but the general laws like – Company Law, IP Law etc., are applicable to these E-commerce businesses as well. In this blog one such secretarial compliance matter which is governed by Contract, Act is what we will be looking at- The top 12 Agreements and Contracts for an E-commerce startup.  Remember, disputes and differences are bound to occur in an online-commercial environment too. Contracts and norms are something pivotal that keeps your disputes and legal woes at bay.


A contract or an Agreement creates and defines obligations between two or more parties and is enforceable by law.  Contracts contain a proposal made by either of the parties to do or abstain from doing a particular action. Most of the contracts templates are available for free on the world wide web, but the unfortunate fact is entrepreneurs have little to no knowledge on validating a contract,  as in, if the contract is actually enforceable under law or not.  We at Wazzeer strongly believe contracts and Agreements are not something that can be taken as a toss but has to drafted with care and intelligence.  In order to make some of your lives simpler, in case you want to validate a contract by yourself, these are the essential elements a valid contract must consist:


  • Proposal and Acceptance.
  • Intention to create legal relationship
  • Lawful Consideration
  • Competent Parties
  • Free Consent
  • Legal Object
  • Not expressly declared void by law.
  • Certainty and possibility of performance
  • Compliance with legal formalities




Moving on, let’s look at the Top 12 Contracts and Agreements that are essential for an E-commerce startup:


  1. Founder’s Agreement: Apart from outlining the roles and responsibilities of the founding members of a company, it lets you know about the equity vested in them, the ownership of intellectual property created by them etc. It covers various aspects of the venture that the founders are about to undertake, even the consequences of their departure or death. 
  2. Website terms & Policies: Most users ignore the terms of service agreement and privacy policy prominently displayed on any website, but all entrepreneurs know their importance. It states that any information which is being gathered by any website will not be disclosed to the third party without any permission or legal action. According to the Information Technology Rule, 2011 in India there is a corporate body to provide a privacy policy for handling of or dealing with personal information, making the privacy policy a must-have for websites. [Disclaimer: A disclaimer is a statement/notice informing the user of any product or service of the possible consequences of the same. The law mandates the display of a disclaimer in certain cases, such as where there is an inherent risk of harm to one’s health] but used commonly in all product and service literature.  It is used in situations which involve an element of risk or uncertainty.
  3. Memorandum of Understanding (MOU): A Memorandum of Understanding is a document in which two or more parties declare that they agree on a common course of action or business. It is the first stage of the making of a contract. To be legally operative, a MoU must: 
  • identify the contracting parties
  • spell out the subject matter of the agreement and its objectives                            
  • summarize the essential terms and must be signed by the contracting parties
  1. Vendor Agreement: It is a comprehensive agreement covering various aspects of the vendor such as the quality of goods supplied or service provided, duration of the contract, terms, and mode of payment. This comes in handy when there are several sellers out in the picture.
  2. Non-solicitation Agreement: This contract is useful where an employee agrees not to solicit a company’s clients or customers, for his or her own benefit or for the benefit of a competitor, after leaving the company. It may also include not provoking other employees to leave when he/she quits or otherwise moves on.
  3. Joint Venture Agreement: This agreement is entered into by a group of persons or companies to do business together or to collaborate on a particular project without losing their individual legal identities. This is legally-binding in areas of profit sharing and operations. Before entering into this, you are supposed to sign the MoU along with the parties.
  4. Non-Disclosure Agreement: NDA is a legal contract stating that certain information is confidential, and the extent to which its disclosure is restricted to third parties. It can be entered into with a person or organization. Confidential information includes trade secrets, business plans, business methods and strategies, drawings, charts and more. Software programs and code are also confidential information. 
  5. Non-compete Agreement: A contract between two parties, where one party agrees not to compete with the other for a period of time. It lessens the possibility that knowledge gained by an employee or business partner will be used in the future to compete against them. In return, for not competing, the party is paid a fee. This agreement outlines the duration of the agreement, any geographical limitations, and what subjects or markets it covers.
  6. Contract of sale: This contract binds the seller and buyer on their duties – the duty of the seller to deliver the goods and of the buyer to accept and pay for them in accordance with the terms of the contract of sale. This contract cover clauses like: Rules regarding delivery.
  7. Return Policy: This Contract binds the buyer to follow a set of rules and guidelines to qualify a good for a return, as well the rules the buyer has to abide by when the return of product circumstance comes up.
  8. Master Service Agreement: This Agreement permits the buyer and seller to quickly negotiate future transactions or agreements because they can rely on the terms of the master agreement, so that the same terms need not be repetitively negotiated, and to negotiate only the deal-specific terms.
  9. Service-level agreement (SLA): Agreement that guarantees buyer that Particular aspects of the service – quality, availability, responsibilities – are agreed between the seller and the buyer.

 

We at Wazzeer are fully equipped to provide you all the required assistance to run a fully compliant E-commerce startup in India, feel free to contact us. We are just a click away ->”Get your Wazzeer” 🙂

 

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Agreements, Co-Founder agreement

Would just a good idea be sufficient to invest your money and effort into it, all based on “the Trust Factor”? No, people change as time passes by, crucial decisions like entering into a firm as a Co-founder is even more important. I am going to be describing a real-life example of a Cofounder who entered into a business relationship with his friend as a co-founder (let’s name him X and his cofounder Y).  


X and Y were college friends, Y one fine day, proposed his startup idea to X and convinced him to join the business as a Co-founder. X entered into the startup as a founder investing $50K, speaking of the reality that is huge money that anyone could even imagine of investing in a startup that was still in the ideation stage.  


The mistake that X did was believing solely on the “The Trust Factor” did not pay due to attention to drafting a “Co-founders Agreement” not even an exit plan in place. A reach shows, in Indian startup ecosystem, a whopping 53% of startups do the same mistake. If you are someone who could relate to this scenario, go ahead read the available options for you.

  1. Litigation
  2. A Legal notice intimating the co-founders about your interests to exit.
  3. If the startup is registered as a Private Limited Company, call for a board meeting.

The complication of the situation can be eased up based on the entity type you chose to register your startup as.


Greater Goodness if you had a legal Agreement or contract in place: If you did, then these are your options:


  1. Termination of contract Notice: Contract termination is a drastic step and should be done with caution and with proper legal advice. Clauses addressing the situation of exit will determine if the parties can go for exit based on –
  • Breach of contract, or
  • At will

  1. Reformation:

Reformation allows two parties to modify a contract so that it more accurately reflects what the parties intend.  This remedy requires that the contract to be valid.  It may be available when one of the parties had a mistaken understanding of a material term of the contract.

 

When a contract is terminated, it is often said that it “comes to an end” or “ceases to exist”.  However, these statements are somewhat misleading as the contract not only continues to exist but continues to have an operation in some respects.  What is in fact “terminated” is the future performance of the contract – that is, the primary obligations of the parties that have been partially performed at the time of termination and those that would have fallen due for performance had the contract not been terminated.


We at Wazeer think of all these situations and provide a detailed consultation to our clients upfront, all with a motive to provide right information upfront. We would be happy to help you in this matter -> “Get your Wazzeer” 🙂

 

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Agreements, Co-Founder agreement

Importance of asking the right questions to the founding even before creating an entity will protect the organizational culture and safeguard relationships in the long run. Perhaps Co-founders’ agreements is the product of conversations that should take place among a company’s founders at the early stages of formation rather than later in the life of a company. The goal of these conversations is to have an open and honest discussion about the attitudes, fears, and aspirations of individuals involved with the startup. In this blog, we will look at the Top 28 Questions to ask your Co-founders before entering Co-founders Agreement. It is essential to have this conversation – Answering these hard questions now will help you and your co-founders avoid personal conflicts in the future.

 

Strategy

  1. What goals does each of us have for the start-up?
  2. What goals do we have for ourselves?
  3. What are our respective timelines for these goals?

 

Ownership Structure

  1. Who gets what percentage of the company?
  2. What will we each contribute to the company? (e.g., duties, job descriptions, hour commitments, roles, and responsibilities).
  3. How much capital are we each contributing and for what?
  4. Is the percentage of ownership shares subject to vesting based on continued participation in the business?

 

Management

  1. How are key decisions and day-to-day decisions of the business to be made? (e.g., by majority vote, unanimous vote, or certain decisions solely in the hands of the CEO?).
  2. What salaries (if any) are the founders entitled to? How can that be modified?
  3. What happens if one of us wants to leave?
  4. If one founder leaves, does the company or the other founder have the right to buy back that founder’s shares? At what price?
  5. What happens if one of us wants to sell the company, raise money, or kill the company?
  6. What happens if one of us becomes disabled or dies?
  7. What happens if it takes us longer than we expected to get our product up and running? Can we each launch other startups while working on this project
  8. Under what circumstances can a founder be removed as an employee of the business?
  9. What happens if one founder is not living up to expectations under the Founders’ Agreement? How would this situation be resolved?
  10. If it turns out the business is not taking off and we decide to end our venture, can one of us take the idea and try it again?
  11. If we need to raise start-up capital, where will it come from and how much of the company are we willing to give in exchange for that start-up capital?

 

Factors that may be considered in an unequal distribution of equity include:

  1. Who came up with the idea that is the key to the Business Concept;
  2. Who has the greatest stake in the IP in the Business Concept;
  3. Who developed the technology necessary to run the Business Concept;
  4. Who owns the patents on which the Business Concept or its products will be based;
  5. Whether any Founder brings existing copyrights or trademarks into the Company;
  6. Which Founders are providing the start-up capital for the Business Concept and in what percentage contribution;
  7. How much time has each Founder invested in the development of the Business Concept;
  8. Whether all Founders are full-time contributors to the development of the Business Concept;
  9. What was the opportunity cost for each Founder to help create the Business Concept? Those who sacrificed more lucrative, high-power positions at established businesses are often compensated more for their risk than those who were not actively employed when the venture began; and
  10. Who has the industry expertise necessary to get the Business Concept going?

 

It is always helpful to have clear clauses in the Co-founders’ agreement for resolving the conflict as that will avoid confusion and uncertainty and save time and money. The conversation that you have with your founding team will decide the meat of Co-founder’s Agreement – The Agreement lays out the rights, responsibilities, liabilities, and obligations of each founder.

 

Remember, Start-up process entails complex procedures and many bureaucratic hurdles, entrepreneurs are better off using professional services. Hiring a virtual lawyer and virtual accountant can save time and help ensure that the process goes smoothly. For any Legal and Accounting support, Happy to help you, let us talk! 🙂

 

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Secretarial Compliance, Share Certificate, Transfer of Shares

Shares, like any other property, is an investment in a business which can be sold out, when something like that happens the process is called transfer of shares. Shares held by an investor are presumed to be capable of transfer unless the company has restricted the right to transfer them by a provision in its articles, or the shareholder has entered into a contract, such as a shareholders’ agreement, not to transfer the shares. This article is structured to help shareholders understand the methodology of Transfer of shares – What, Why, and How may it be done.

Statutory provisions:

  1. Section 56 of Companies Act, 2013
  2. Rule 11 of Companies (Share Capital & Debentures) Rules 2014
  3. Provisions are given in model articles of association given in Table ‘F’ of Schedule-I



Procedure for Transfer of Share in a Private Company:

 

Generally, articles contain the detailed provisions as regards to the procedure for transfer of shares. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—

 

  1. Transferor should give a notice in writing for his intention to transfer his share to the company.

 

  1. The company, in turn, should notify to other members as regards the availability of shares and the price at which such share would be available to them.

 

  1. Such price is generally determined by the directors or the auditors of the company.

 

  1. The company should also intimate to the members, the time limit within which they should communicate their option to purchase shares on transfer.

 

  1. If none of the members comes forward to purchase shares then the shares can be transferred to an outsider and the company will have no option, other than to accept the transfer.

 

  1. Get the Share transfer deed in form SH-4 duly executed both by the transferor and the transferee.

 

  1. The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned. The present rate of transfer of shares is 25 Paise for every one hundred rupees of the value of shares or part thereof. Do not forget to cancel the stamps affixed at the time or before the signing of the transfer deed.

 

  1. The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name, and address.

 

  1. Attach the relevant share certificate or allotment letter with the share transfer deed and deliver the same to the company. The share transfer deed should be deposited with the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee.

 

  1. After receipt of share transfer deed, the board shall consider the same. If the documentation for transfer of share is in order, the board shall register the transfer by passing a resolution.

 

 

Procedure for Transfer of Share in a Public Company:

 

Section 58(2) provides that the shares or debentures and any interest therein of a public company shall be freely transferable. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—

 

  1. Get the Share transfer deed in form SH-4 duly executed both by the transferor and the transferee.

 

  1. The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned. The present rate of transfer of shares is 25 Paise for every one hundred rupees of the value of shares or part thereof. Do not forget to cancel the stamps affixed at the time or before the signing of the transfer deed.

 

  1. The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name, and address.

 

  1. Attach the relevant share certificate or allotment letter with the share transfer deed and deliver the same to the company. The share transfer deed should be deposited with the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee.

 

  1. After receipt of share transfer deed, the board shall consider the same. If the documentation for transfer of share is in order, the board shall register the transfer by passing a resolution.

 

 Main Provisions related to Transfer of Share:

 

  1. Instrument for Transfer of Share is compulsory: Section 56 provides that a company shall not register a transfer of shares of, the company, unless a proper transfer deed in Form SH.4 as given in Rule 11 of Companies (Share Capital & Debentures) Rules 2014 duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company, along with the certificate relating to the shares, or if no such certificate is in existence, along with the letter of allotment of the shares.

 

  1. Time Period for deposit of Instrument for Transfer: An instrument of transfer of shares i.e. Form SH.4 with the date of its execution specified thereon shall be delivered to the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee.

 

  1. Value of share transfer stamps to be affixed on the transfer deed: Stamp duty for transfer of shares is 25 paise for every Rs. 100 or part thereof of the value of shares as per Notification No. SO 130(E), dated 28-01-2004 issued by the Ministry of Finance, Department of Revenue, New Delhi.

 

  1. Time limit for issue of certificate on transfer (Section-56(4)): Every company, unless prohibited by any provision of law or of any order of any Court, Tribunal or other authority, shall, within One month deliver, the certificates of all shares transferred after the application for the registration of the transfer of any such shares, debentures or debenture stock received.

 

  1. Private company shall restrict right to transfer its shares: Entire shareholding of a private company may be owned by a family or other private group. Section 2(58)(i) of the Companies Act, 2013 provides that the Articles of a private company shall restrict the right to transfer the company’s shares.

 

  1. Restriction on transfer in Private Company not applicable in certain cases: Restriction upon transfer of shares is in private company are not applicable in the following cases:

 

(i) on the right of a member to transfer his/her shares cannot be applicable in a case where the shares are to be transferred to his/her representative(s).

 

(ii) in the event of the death of a shareholder, legal representatives may require the registration of share in the names of heirs, on whom the shares have been devolved.

 

Note: Restriction should not be in the form of prohibition and Restriction can only be by the Articles of Association.

 

  1. Time Limit for Refusal of registration of Transfer: Provisions related to Refusal of registration and appeal against refusal is given in Section 58 of the Companies Act, 2013. Power of refusal to register transfer of shares is to be exercised by the company within thirty (30) days from the date on which the instrument of transfer or the intimation of transfer, as the case may be is delivered to the company.

 

  1. Time Limit for appeal against refusal to register Transfer by Private Company: As per section 58(3), a transferee of shares may appeal to the Tribunal against the refusal within a period of thirty (30) days from the date of receipt of the notice from the Company or in case no notice has been sent by the company, within a period of sixty (60) days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, was delivered to the company.

 

  1. Time Limit for appeal against refusal to register Transfer by Public Company: As per section 58(4), a transferee of shares may, within a period of sixty (60) days of such refusal or where no intimation has been received from the company, within ninety (90) days of the delivery of the instrument of transfer or intimation of transmission, appeal to the Tribunal.

 

  1. The penalty for Non-compliance: Where any default is made in complying with the provisions related to transfer of shares, the company shall be punishable by a fine which shall not be less than Rs. 25,000/- but which may extend to Rs. 5,00,000/- and every officer of the company who is in default shall be punishable with fine which shall not be less than Rs. 10,000/- but which may extend to Rs. 1,00,000/-.

 


Start-up process entails complex procedures and many bureaucratic hurdles, entrepreneurs are better off using professional services. Hiring a virtual lawyer and virtual accountant can save time and help ensure that the process goes smoothly. For any Legal and Accounting support, Happy to help you, let us talk!

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Agreements

Our basic understanding intimates that – when one party fails to fulfill the conditions of the contract then the agreement is considered breached.  Well, there is more to that, it depends upon the nature of the contract itself. The breach can occur during complex and simple transactions as well.Breach of contract is easy to prove during the specific contract but it may be difficult to prove it is not a specific contract or it is vague. Section 73, 74 and 75 of the Indian Contract Act deals with the Breach of Contract. Breach of contract leads to frustration for the parties involved and also the wastage of time and money. 

A breach occurs when:

  1. When one party does not perform his part of duty.
  2. When something prohibited is done by the party.
  3. When customer prevents the contractor to do his part of the job or finishing the project at hand.
  4. When time is the essence of the contract and the contractor does not do his work completed on time.
  5. It is at the option of the other party to breach the contract or not when the time is not the essence of the contract and the performance has not happened on time.
  6. The contract is voidable or can be breached if the performance is not done according to the requirements of the contract. For example: when the product is not according to the size, shape, color, design, quantity or quality etc.
  7. When it is impossible to perform the contract.
  8. Contract with minor is void.
  9. When other party does not do the work and refuses it to do before the completion of time period or fails to do.
  10. Delay in the delivery of the product and harassment can cause a breach of contract.


Types of Breach:

  • MATERIAL BREACH- this breach occurs when one party fails to perform his part of the contract and causes loss or damages to the other party.
  • FUNDAMENTAL BREACH- this allows the aggrieved party to stop performance of the contract and sue for damages.
  • MINOR BREACH- in this, you cannot sue the person for actual performance but for partial breach. There is an option for the party either to sue for damages or ask the other party to correct their mistakes or perform his duty as per the requirements.
  • ANTICIPATORY BREACH- when one party breaks the contract by not executing his/ her part of the contract within the allocated time.



Remedies that businesses or individuals can take in response to such a  situation:

  • Liquidated damages– these are specified in the contract.
  • Compensatory damages– compensate for losses and reimburse the cost.
  • Attorney’s fees– it is recoverable when expressly included in the contract.
  • Punitive damages– it is given for the offensive behavior or action for the defendant.


There is a strong reason why we decided to write a blog on this topic. We at Wazzeer have recently encountered with entrepreneurs seeking a third view on their existing Agreements to react or send notice on breaching of agreements. Being caught up in core business activities is definitely a priority, but when things like Agreement breaching goes un-noticed, would land your company as such in problems. We at Wazzeer will be happy to ensure that nothing ever goes wrong in your legal and accounting matters, ‘Get a Wazzeer’ 🙂

 

 

 

 


 

 

 

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