Advocate Manish Acharya

Questions Answered by Advocate Manish Acharya

Q: Vested Equity and Removal of company director

We are a 7 man startup team, 3 of which are registered as the director of the company. The first director has 34% shares and the other two have 33% share. We filed the MOA in which this was mentioned. However now that we are ready to deploy our product the first director is not putting in the required effort and waiting to cash in if we succeed. We don't currently have a vested equity agreement. can we remove the director without giving 34% shares of the company to him. And how can we implement vested equity?

Advocate Manish Acharya answered
Your situation is not unique. There are a number of young companies which face such a challenge. Resolving such an issue is possible, although it may require a detailed understanding of facts. However, that the delinquent team member has only 34% shareholding makes it relatively favourable for you to effectuate an exit.To answer your question: no, you cannot simply remove the delinquent team member. The fact that his name appears in the Memorandum of Association signifies that he is entitled to a certain number of shares. I assume the equity shares are declared to be issued as fully-paid up shares. However, depending on the specific facts of your case, there could be legal methods by which you could effectively disassociate such member from your company. The information required for me to advise you fully is: (a) What are the assets on the balance sheet of the company?, (b) Do you have a Shareholders' Agreement? If yes, a review of the same is required, (c) Do you have employment contracts with the team members?, (d) Are there emails exchanged in the past stating rights and obligations of each member? The answers to these questions are the starting points for designing an effective legal strategy.Best wishes.

Q: Company voting rights between partners

My partner and I own a business 45% - 45% with remaining shares with investors. Now my partner is looking to split his shares between himself and his wife as 23% + 22%. Will this give him more voting rights in any situation since they are 2 people with majority shares? Is there any additional benefit he will have with a representation of 2 people while i hold all shares on my own. should i also split my shares with my wife?

Advocate Manish Acharya answered
For the sake of discussion, let's consider you and your partner to be two shareholder groups. The number of shareholders in a group is not relevant. The rule of law is each equity share has one vote. As such, there is no reason for concern if there are two shareholders in one group, while your group has only one. Who within a group actually holds the shares is relevant only if the Articles of Association of your company stipulate the need for a director to hold qualification shares.What is relevant in your specific case is the provision in your Shareholders' Agreement concerning management control through board representation. This would generally depend on the percentage of shareholding of each group, and should be independent of number of shareholders in each group. This is critical given the leverage available to the investor holding 10% stake (who can form an effective majority in collaboration with any one partner holding 45%).Trust this clarifies. Best wishes.

Q: What is the procedure to form a LLP

I intend to form an LLP. There will be 3 individual partners and I will be the designated partner. I already have Class II digital signature certificate and DIN. Will each of the other two individuals also require digital signature and DIN? Please help clarify. Thank you.

Advocate Manish Acharya answered
Yes, each individual needs to have a DIN and a DSC in order to become a partner in a LLP. .

Q: Director of the company how can I resign

We are 3 director in the company and i want to exit from the company. They are not accepting my resignation without any reason. Please let me know what should i do. Can i join any other company for example banks for my next job

Advocate Manish Acharya answered
A director may resign from office without the approval of the company. You can tender your resignation by email or registered post, and file Form DIR 11 ((Notice of resignation of a director to the Registrar).

Q: Can company authorize share capital of rs 25 crores

Can a company having authorised share capital of 25cores isuue 750cores preference share capital ??

Advocate Manish Acharya answered
No. Technically, Preference Share Capital is a sub-set of Authorised Share Capital. It cannot be larger than Authorised Share Capital.Also, you may want to check the Capital clause of the company in its Memorandum of Association to understand the maximum permissible limit of each type of shares.