What is a Deed of Adherence?

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


Deed of Adherence

What is a Deed of Adherence?

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 where a Shareholder’s Agreement is already in place. This is either by subscribing to new shares or by acquiring existing shares.

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

What is the purpose of the ‘Deed of Adherence’?

A Deed of Adherence or (Deed of Accession) 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 purposes of the deed of adherence is, that 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.

Also, you can check our Shareholders Agreement document here.

Who signs a Deed of Adherence?

A Deed of Adherence needs to be signed by anyone who is interested in investing in a company and wants to become a shareholder. 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?

Deed of Adherenc 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 to the terms and conditions mentioned in the existing shareholder’s agreement.

Which documents have to be executed as a deed?

There are a limited number of documents that require execution by way of a deed, including leases, the appointment of trustees, powers of attorney, land transfers, mortgages, and charges. The legality or even the validity of the agreement can be questioned if one fails to follow relevant requirements,

Why do companies require a Deed of Adherence?

All shareholder agreements have terms and conditions that are put in place to ensure that the shareholders are well aware of their rights and obligations. When introducing a new shareholder, the existing shareholders will expect and want the individual or the company to be in agreement with the same terms and conditions.

Hence, companies require a signing of the deed of adherence so that the new shareholders can be subject to the same conditions as the older shareholders. 


Conclusion

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

You Might Also Like

Along with this document, make sure you see these other templates in our library:

The Zegal Template Library

Zegal's template library is a list of essential and premium business templates for your everyday legal needs.

Save money and time without sacrificing quality or missing vital legal requirements. Whether you're a startup or a larger enterprise, Zegal lets anyone create a legal agreement.

Let us take care of the legals so you can focus on running your business.

If you need more help, our "Talk to a Lawyer" feature gives you access to a qualified lawyer to get all the expert advice you need.

Try it for free today!

Related Documents

If you're creating a Deed of Adherence, you may also be interested in the following documents: