A shareholders` agreement can provide a variety of instruments in these circumstances. First, the agreement may include a buy-sell or «shotgun» provision. This provision provides a mechanism by which a shareholder may, at the option of the other shareholder, attempt to sell his shares or acquire the shares of another shareholder. The problem, however, is that he can work unfairly against a shareholder with insufficient financial capacity to make a purchase under the shotgun and be forced to sell at a discount. For example, if a minority shareholder wanted to leave a family business, they would probably not be able to use a shotgun determination. In the case of MCX Stock Exchange Ltd vs Securities & Exchange Board of India & Ors [6], it has been stated that «in the case of an option, a closed purchase or repurchase agreement is not entered into until the option is exercised. In the opinion of the SCRA, a contract for the sale or purchase of securities must be a cash supply contract. In the present case, the purchase or purchase contract is concluded only with the exercise of the option in the future. If the option was not exercised by them, no contract for the sale or purchase of securities would be concluded.
In addition, when exercising the option, there is no indication that the execution of the order would be carried out by anything other than a punctual delivery. «Put options,» as well as «call options,» are commonly used in shareholder agreements in the United States. As you know from our other articles, a shareholders` agreement sets out the rights and obligations of shareholders and sets out how the corporation is governed. Most disputes are eventually settled amicably. However, there will be times when a dispute over an important issue cannot be resolved informally and the survival of the family business may be threatened. It can be difficult for family members to discuss planning issues related to the collapse of the business, but it must be remembered that it is precisely this reluctance to deal with problems that poses the greatest risk. Family members should plan a clear strategy for conflict resolution. The most useful tool is a well-prepared shareholders` agreement. By forcing family members to resolve issues before going into business, the actual process of preparing a shareholders` agreement can help avoid future conflicts.
To foster effective communication and collaboration, family members may even seek the help of a mediator at this stage. A put option in a shareholders` agreement is an important mechanism to reduce the risk of capital loss for shareholders and provides a convenient way to withdraw investments in a company. To be effective, a put option must specify whether the shareholder has the right to sell shares, indicate the amount or percentage of shares subject to the put option, and comply with all applicable state and federal laws. A «put option clause» is often used in a shareholders` agreement. In general, the shareholders` agreement sets out the rights and obligations of the shareholders, as well as how the company is governed. An option clause in the shareholders` agreement is a clause that defines the rights and obligations of the shareholders, where the investor has the option to «call» the shares or put them on the table. This forces the founders to buy or sell the shares at a predetermined price. Similar to a put option, the Company may receive a «call option» that would allow it to repurchase the shares of a shareholder who has terminated his or her employment with the Company at any time after the date of such termination. The second, most useful tool for dealing with irreconcilable differences is a put option. A put option entitles a shareholder who wishes to send written notice to the other shareholders requesting them to acquire all the shares of the company that are beneficially owned by that shareholder.
The shareholders` agreement would specify the formula for determining the purchase price of the shares and the period during which the put option could be exercised. For example, to give the company sufficient time to prepare for initial growth challenges, the shareholders` agreement could stipulate that the put option can only be exercised after two years. Unlike the shotgun clause, a minority shareholder could use a put option with limited funds. The applicability of put and call options has always been the subject of debate with conflicting views on the subject. .