An Entrusted Shareholding Agreement is commonly used in India when direct ownership of shares needs to be structured through a nominee arrangement, whether for strategic, regulatory, or practical purposes. This document is essential in situations where beneficial ownership needs to be separated from legal ownership, such as in family businesses, cross-border investments, or complex corporate structures. The agreement ensures compliance with Indian corporate law, securities regulations, and trust law while protecting the interests of both the beneficial owner and the nominee shareholder. It typically includes comprehensive provisions for share management, voting rights, dividend handling, and eventual transfer mechanisms, along with necessary regulatory compliance measures.
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1. Parties: Details of the entrusting shareholder (beneficial owner) and the nominee shareholder
2. Background: Context of the arrangement and relationship between parties
3. Definitions: Key terms used throughout the agreement
4. Scope of Entrustment: Details of shares being entrusted, including quantity, class, and company details
5. Declaration of Trust: Formal declaration of the nominee holding shares in trust for the beneficial owner
6. Rights and Obligations of the Nominee: Detailed responsibilities of the nominee shareholder including voting, dividend collection, and record-keeping
7. Rights and Obligations of the Beneficial Owner: Powers retained by the beneficial owner and their ongoing obligations
8. Consideration and Expenses: Any fees or expense arrangements between the parties
9. Representations and Warranties: Standard and specific warranties from both parties
10. Term and Termination: Duration of the agreement and circumstances for termination
11. Share Transfer Mechanism: Process for transferring shares back to beneficial owner or their nominee
12. Confidentiality: Provisions for maintaining confidentiality of the arrangement
13. Indemnification: Mutual indemnification provisions
14. Governing Law and Jurisdiction: Applicable law and courts having jurisdiction
15. Dispute Resolution: Process for resolving disputes between parties
1. Foreign Exchange Compliance: Required when any party is non-resident or foreign exchange regulations apply
2. Multiple Beneficial Owners: Required when shares are held for multiple beneficial owners
3. Voting Arrangements: Detailed voting procedures when specific voting arrangements are required
4. Dividend Distribution Mechanism: Specific arrangements for handling and distributing dividends
5. Change in Law Provisions: Mechanisms to handle regulatory changes affecting the arrangement
6. Step-in Rights: Rights of beneficial owner to replace nominee in specific circumstances
7. Anti-dilution Provisions: Protection mechanisms for beneficial owner in case of corporate actions
1. Schedule 1 - Share Details: Detailed description of shares including certificate numbers, distinctive numbers, and class of shares
2. Schedule 2 - Company Information: Details of the company whose shares are being entrusted
3. Schedule 3 - Initial Resolutions: Format of board/shareholder resolutions required to implement the arrangement
4. Schedule 4 - Transfer Forms: Pro-forma share transfer forms for future use
5. Schedule 5 - Power of Attorney: Format of power of attorney if required for the arrangement
6. Schedule 6 - Deed of Adherence: Format for adding new parties to the agreement if required
7. Appendix A - Communication Protocols: Agreed procedures for communications between parties
8. Appendix B - Regulatory Compliance Checklist: List of compliance requirements and documentation
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