MASTERCLASS ON THE NEW COMPANIES ACT. Special Focus on PE/VC and M&A Impact on Term Sheets & Investments. Khaitan & Co LLP. Background. Company: XYZ Limited (public unlisted) Investor: You (through Mauritius) Promoter: One Promoter with several family members holding shares
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Special Focus on PE/VC and M&A
Impact on Term Sheets & Investments
Khaitan & Co LLP
New Restriction | Layered Investments
Exemptions [Proviso, S 186 (1)]:
Voting: The Series A Equity Shares shall carry voting rights equivalent to 26% (Twenty Six percent) of the Share Capital.
Expenses: The Company shall bear all costs and expenses relating to any due diligence exercise to be conducted in the course of the Transaction and any legal or other fees relating to the negotiation and finalization of the Transaction Documents and the Closing of the Transaction.
The Promoter shall purchase all securities held by the remaining members of the Promoter Group at a price to be determined inter-se the Promoter Group and the Promoter Group shall no longer have any legal or beneficial interest in the Company upon the conclusion of such purchase
New Concept [S 195]
The Investor Directors shall not be liable for any failure by the Company to comply with applicable law and shall not be considered as ‘officers in default’. The Company will indemnify the Investor Directors to the greatest extent permitted under applicable law and shall obtain directors and officers liability insurance to the satisfaction of the New Investor providing adequate insurance coverage to the Investor Directors.
Addition to the list of powers which can be exercised only at a Board meeting:
Attendance of Meetings: To the extent permitted under and in compliance with applicable Law, any Director may participate in and vote at a meeting of the Board by means of telephone, video conferencing or similar communications equipment which allows all persons participating in the meeting to hear each other and to record the deliberations. Where any Director participates in a meeting of the Board by any of the means described in the preceding sentence, the Company shall ensure that that Director is provided with a copy of all documents to be referred to during such meeting of the Board before the meeting of the Board commences.
Schedule [--] hereto contains a list of indicative affirmative vote items, to be finalized in the SHA (the “Reserved Matters”).
The Company shall not take any action in respect of any of the Reserved Matters (whether in a meeting of the Board, any committees or the Shareholders) without the consent of each Investor Director or each of the Existing Investor’s or New Investor’s representatives, as the case may be.
Promoter’s Waiver: The Promoter agrees and undertakes to waive and renounce his/her rights and entitlements to participate and subscribe to the Ratchet Securities in favour of the New Investor and the New Investor shall be solely entitled to participate and fully subscribe to the Ratchet Securities in accordance with their terms
Articles of Association: The Articles of Association of the Company shall be amended and restated in order to reflect the provisions of the Transaction Documents at Closing.
Is this clause necessary?