This document is a clause to be inserted into a shareholders’ agreement, and provides an indemnity for new shareholders.
Where shareholders’ agreements are negotiated between founding shareholders and new shareholders, it is common for new shareholders to require that the founding shareholders indemnify the new shareholders. The new shareholders are indemnified against any losses suffered as a result of a breach of undertakings, representations and similar, by the founding shareholders.
This clause is an example of the type of indemnity clauses included. There could be a number of other instances where new shareholders may require founding shareholders to provide an indemnity, for example, in relation to any losses suffered as a result of specific agreements reached by the founding shareholders or the company, prior to the new shareholder being allocated shares in the company.
Using this precedent
This is a general clause which can be used in a shareholders’ agreement. This clause can also be inserted into the separate precedent “Shareholders’ agreement (short form)”.
When inserting this optional clause into an agreement, care must be taken to ensure that the agreement remains consistent. Cross-references, definitions and schedules should all be checked.
This document has been authored for LexisNexis by Elise Margow, Principal, Legally Speaking.
This document is prepared with the assistance of Specialist Editor Stephen Newman, Executive Counsel, Ponte Earle.