What is a Deed of Accession?
A deed of accession is a legal document used when a new shareholder wants to join an existing shareholders agreement between the current shareholders. This document outlines the terms and conditions of the new shareholder’s participation in the agreement, and it is typically signed by all parties involved, including the new shareholder.
An analogy to explain this could be joining a team. Imagine that a team has already been established, with specific rules and regulations that its members must follow. Now, let’s say that you want to join this team. To do so, you would need to sign a document that outlines the terms and conditions of your membership, such as the responsibilities you need to fulfil, the expectations you need to meet, and the benefits you will receive as a member.
This document would be similar to a deed of accession because it sets out the terms of your joining the team, just as a deed of accession sets out the terms of a new shareholder’s participation in an existing shareholders’ agreement.
David contacts the company’s management team and expresses his interest in purchasing shares. The management team informs him that an existing shareholders’ agreement outlines the terms and conditions of the current shareholders’ participation in the company. They explained that he would need to sign a deed of accession if he wished to become a shareholder and participate in the agreement.
David agrees and receives a copy of the shareholders’ agreement and the deed of accession. He reads through the documents carefully and consults with his legal advisor to ensure that he understands the terms and conditions of the agreement.
After reviewing the documents, David signs the deed of accession and sends it back to the company’s management team. The management team reviews the document and confirms all parties involved have signed it, making David an official company shareholder.
Now that David is a shareholder, he is entitled to certain rights and benefits outlined in the shareholders’ agreement, such as voting rights and dividends. He is also subject to certain obligations, such as compliance with the company’s policies.
In the end, purchasing shares and signing a deed of accession is a necessary step for David to become a shareholder of the company and the shareholders’ agreement David has agreed to, also allowing him to participate in its growth and success.