Friday, April 3, 2009

Demystifying concepts and terms used in agreements

My colleague, Daksh Trivedi has recently written an interesting article in The Mint, where he has discussed the various legal concepts/ terms used in shareholders and share purchase agreements. He begins with:

Typical documents used for capturing terms of equity investments, that is, share-purchase agreements or shareholders’ agreements, are now complex and ridden with industry terminology such as these. This may be explained as a consequence of increased foreign equity participation in Indian companies, which has resulted in the import of internationally identified terms of negotiation. While parties represented by industry specialists are quite familiar with such concepts, and therefore adept at using such terminology to their advantage, these terms can nevertheless sometimes be misunderstood.

While discussing and simplifying various oft-used terms, such as "ROFR", "ROFO", "Tag-along", "Drag-along" and so on, Daksh rightly notes that the enforceability of all these concepts/ terms remain subject to the touchstone of the law governing foreign investments in India.

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