When an enterprise issues new subscription shares to the public, this issue is considered as a means of diluting the value of the shares held by the original shareholders. A price-based anti-dilution agreement protects investors from future issuance of shares at a lower price than that paid by original investors. In India, the implementation of dilution protection is complex under existing legislation. For example, shares issued to foreign investors must comply with the pricing policies included in foreign exchange management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 (“FDI Regulations”). Under the Pricing Guidelines, capital instruments issued or transferred to a foreign resident must be valued in accordance with any internationally recognized pricing method for valuation in subcontracts, duly certified by a SEBI registered chartered accountant or merchant banker or a practicing cost accountant in the case of an unlisted company. An SHA may contain terms found in the statutes; However, a SHA is generally larger and offers greater protection to shareholders. There is no standard form that makes SHAs flexible to meet the specific needs of shareholders. Articles and ASAs are often complementary. In many jurisdictions, the articles of association can only be amended by a special decision (75% or more of the shareholders present and voting at a general meeting). However, a SHA often requires unanimous agreement for its revision, but may also require the approval of the super-majority (a number of votes well in excess of half of the voting shares, but less than 100%). The inclusion of an anti-dilution adjustment clause in the Charter of Companies Status of companies The statutes of the company are the rules governing the way a company is managed and one of the first points defined by the board of directors at the time of the creation of a company. These articles of association are usually drawn up after the presentation of the articles of association and encourage the company to seek higher valuations in new funding rounds.
It also incentivizes the company to continuously achieve milestones set by investors, such as revenue targets and other growth targets, in order to increase the value of its common shares. An anti-dilution contractual adjustment is an agreement between the original investors and the company, under which it agrees to issue additional common shares to investors in order to maintain their ownership stake in the company until it finds the necessary capital. It protects shareholders against dilution of their ownership share by new share issues in the future. In the event of a voluntary transfer, the selling shareholder must ensure that the conditions for the purchase of his shares are extended to the other shareholders in relation to their respective shareholdings. Tag Along-Rights exist to protect minority shareholders, so that when a majority shareholder sells their shares, they give other shareholders the right to join the transaction.