Guide To Our Deed Of Adherence Template

Posted by Stephen on 28th September 2015

You should use our Deed of Adherence template should where there is an existing shareholders agreement in respect of a company and either:

  • One shareholder is now selling his shares in the company to a new shareholder (who was not one of the existing shareholders), including if he is selling some of those shares to other shareholders who are existing shareholders; or
  • the company is issuing new shares to a new shareholder (who was not one of the existing shareholders).

It assumes you are not making any changes to the terms of the existing shareholders agreement and you are simply admitting a new shareholder. For his part, the new shareholder agrees to be bound by the same terms via this deed of adherence. A deed of adherence is also sometimes called a “deed of accession” – they both mean the same thing in the context of a shareholders agreement.

This Deed of Adherence template comes with options for you to choose from, so it applies whether or not the shareholders are all companies, all individuals or a mix of each.

When not to use this template

Don’t use this draft Deed of Adherence where:

  • the agreement is an LLP members agreement – here you need a deed of adherence to an LLP members agreement; or
  • the agreement is a partnership agreement – here you need a deed of adherence to a partnership agreement; or
  • you are transferring all of the shares only to existing shareholders, and you are not transferring any of them to a new shareholder – here you would not need a deed of adherence or an updated shareholders agreement; or
  • you are issuing new shares only to existing shareholders, and you are not issuing any of them to a new shareholder – again, here you would not need a deed of adherence or an updated shareholders agreement; or
  • if you are changing the terms of the shareholders agreement then you simply need a new shareholders agreement – you can use our template for that. If you are taking on a new shareholder at the same time, simply add them into the new shareholders agreement as an additional party at that time.

Clauses in Our Deed of Adherence

The rest of this guide takes you through the key provisions in the template, so you know what it covers. When you buy the template, then you will receive the full guide at that point.

Background

(A) Fill in the date of the shareholders agreement and the name of the company it relates to.

(B) In the first part of this clause, choose which option applies, depending on whether you are transferring shares or issuing new shares. Fill in the details of the shares you are transferring or issuing. The class will usually be “ordinary”. The nominal value is also known as the par value – this is normally £1.00. (In other words, it is not the price they have been sold for.)

Numbered clauses in the Deed of Adherence

1. Interpretation

This clause defines the main terms used in the agreement. This is brief in this agreement, because the shareholders agreement will have already defined most of the terms used.

2. Adherence

This is the main clause which states that the new shareholder has had a copy of the shareholders agreement (please ensure this happens) and, by his taking over the transferor’s rights and obligations, then he agrees to be bound by it. In clauses 2.1.2 and 2.1.3, keep the first option in each case if you are transferring shares or keep the second option in each case if you are issuing new shares, and then delete the options that do not apply.

3. No release

This provides that the transferor is not let off any liability he already has. For example, if he has breached the Shareholders Agreement, then he would remain liable for that. If, instead of a transfer of shares, you are issuing new shares, then delete the whole of clause 3.

4. Counterparts

Because you must sign this agreement as a deed, this clause provides that you can have sufficient prints of it signed by each party separately and held by the other parties if you wish. In other words, they don’t all have to sign the same physical print.

5. Rights of third parties

This clause excludes the Contracts (Rights of Third Parties) Act 1999 from applying to the agreement, so that only the parties to the agreement can enforce it.

6. Law and jurisdiction

If any party is based abroad, then you may wish to change the jurisdiction clause to reflect this and/or make it non-exclusive. Otherwise leave it as the UK.

The Schedule

Insert the details here of the ongoing shareholders’ names and addresses, as mentioned above.

 

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