What is a Deed of Adherence?
A Deed of Adherence is used when a new shareholder joins a company with a shareholders’ agreement already in place.
How to create a Deed of Adherence
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Deed of Adherence Definition
When a new person or entity joins a company with a shareholders’ agreement in place, they may be required to sign up to the shareholders’ agreement as well. A Deed of Adherence or (Deed of Accession) makes this possible. It is signed by all the shareholders of the existing shareholders’ agreement, together with the incoming shareholder and ensures that the new shareholder agrees to all the terms and conditions agreed in the existing Shareholders Agreement.
Who Needs to Sign a Deed of Adherence?
A Deed of Adherence should be signed by any shareholder joining a company that has a shareholders’ agreement already in place. This means that if you are investing in a company or buying shares in a company, you should ask if there is a shareholders’ agreement already.
Deed of Adherence Vs. a Shareholders Agreement
A Shareholders’ Agreement is a contract between all or the main shareholders of a company to regulate their relationship, determine how shares are controlled, and to govern the way executives run the business.
Drafting and agreeing a new Shareholders’ Agreement is not usually needed for one additional shareholder. To quickly agree the same terms, a company uses a Deed of Adherence which is a short document signed by all the original parties and the new incoming shareholder. This way, there is no need to re-draft the Shareholders Agreement each time a new investor joins the company and wants to become a shareholder.
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.
Deed of Adherence Format
The deed is a short form agreement between all the original shareholders and the new incoming shareholder which makes it legally as if the new shareholder had signed the original agreement.
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