Overview of a Deed of Adherence

What is a Deed of Adherence?

A Deed of Adherence is a document by which a person/entity becomes a party to an existing Shareholder’s Agreement.

A Deed of Adherence is used when a person/entity becomes a shareholder of a company (by subscribing to new shares or by acquiring existing shares) where a Shareholder’s Agreement is already in place.

By executing a Deed of Adherence, the new shareholder becomes a party to the Existing Shareholder’s Agreement and is bound by all the terms of that agreement.

What is the purpose of the Deed of Adherence?

A Deed of Adherence is a document that allows a new person to become a shareholder of any company. It implies that the new shareholder agrees to all the terms and conditions mentioned in the existing Shareholders Agreement.

One of the main benefits of this document is, it can save a lot of time and money for the company because there is no need to re-draft the Shareholders Agreement each time whenever a new investor joins the company and wants to become a shareholder.

What is a Shareholders Agreement?

A Shareholders’ Agreement, also known as a Founders’ Agreement, is a contract among founders of a company to regulate their rights as shareholders of the company. It consists of various terms that regulate the rights and duties of the shareholders towards the company.

You can also check our Shareholders Agreement document here

Who signs a Deed of Adherence?

Any person who is interested in investing in a company and wants to become a shareholder needs to sign a Deed of Adherence. It binds the new investor to the terms and conditions of the existing Shareholders’ agreement of that company.

What does a Deed of Adherence Contain?

It is a simple document that is used whenever a new investor wants to invest in a business and become a shareholder. It is a short form of a Shareholders Agreement which is easy to draft and has fewer legal formalities. The important thing to include in a Deed of Adherence is that new investors consent to agree on the terms and conditions mentioned in the existing shareholder’s agreement.

Conclusion

A Deed of Adherence is an important document used before inviting any new investor to become the shareholder of a company. It is relatively simple and has very few formalities which can save a lot of time and money for any organization. It also acts as a legal binding for the new investor by complying with the obligations mentioned in the existing shareholder’s agreement.

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