Shareholder Agreement Indemnification Clause

A claim for compensation under Section 73 of the Contracts Act can only be invoked against the party who made the contractual undertaking. The existence of a contract is a prerequisite for a claim under this section. However, the liability of the person responsible for the compensation provisions applies to losses or liabilities resulting not only from the professional`s actions, but also from the acts of third parties or an event. This extension is an important advantage that a compensation clause has over a claim. Compensation clauses are the inherent instruments to protect the buyer`s interests in the event of a breach of the insurance and guarantees provided by the seller under the SG. In addition to breaches of contract by the seller, a compensation clause also protects a buyer from any third-party deed or the occurrence of an event that may or may not occur before the closing date under the G.S.O. Damage, on the other hand, is the alternative available under the Contracts Act. The damages awarded to the purchaser, as explained above, are heavily penalized, since the applicant will be subject to several conditions that limit the extent of the damages that can be claimed. In addition, the absence of a cap on claims exposes the seller to uncertain liability. This distribution of risks and liabilities by a compensation clause in a BSG thus gives a guarantee to the transaction, since the exposure of one of the two parties to the transaction is defined.

The purpose of this particular component of a unanimous shareholder contract is to determine the obligation for shareholders and the company, when a shareholder has sold the entirety of his investment in accordance with the United States, to make reasonable efforts to have a guarantee or commitment to be granted by the shareholder, which will be discharged or cancelled, and to compensate the outgoing shareholder for the debts arising from such a guarantee or after his departure. Compensation is a company`s commitment to compensate for losses, liabilities or damages suffered by another person as a result of an act or omission by a person or third party or event. Section 124 of the Indian Contract Act, 1872 (Contract Act) defines a “compensation contract” as a contract by which one party promises to save the other party from the loss it suffered by the behaviour of the Promisor itself or by the behaviour of another person. However, this is not a comprehensive definition of compensation and, therefore, the compensation clauses in stock purchase contracts (BSBs) may, in accordance with common law principles, have a broader scope than those provided for by the Contract Act. When developing compensation provisions, balance the interests of the company with the interests of the director. Consider: As a general rule, the BSP provides a compensation clause for managing the risk of losses related to the contract. These are often heavily discussed and negotiated in the GNP, and these are relevant to sellers who are trying to limit future debts, as well as to buyers who wish to guard against losses or debts resulting mainly from the inaccuracy of the seller`s representations at the sale or an event that might have been in the seller`s possession. , or because of an event that may occur after the closing of the sale, not necessarily depending on the seller`s behavior.