What is an accession agreement? An Accession Agreement is also known as a deed of accession or a deed of adherence and is a deed that binds a person to an existing shareholders agreement. This pre-empts the need for a new shareholders agreement every time a new shareholder joins the company.
The reason why it is prepared as a deed and not as an agreement is to ensure that it is enforceable. This is because as opposed to an agreement, a deed does not require any consideration to be given by the opposite party.
The deed of accession is often attached to the shareholders agreement in the form of an appendix.
When Do You Need an Accession Agreement?
This agreement is needed when a new shareholder joins a particular company. Instead of creating a new shareholders agreement every time a new shareholder joins the company, the new shareholder can just sign on a blanket shareholder accession deed template. On signing this, the shareholder will be bound by the provisions of the original shareholders agreement.
Hence, the purpose of this agreement is to make sure that there is no need for a new shareholders agreement each time a new shareholder joins the company. Just by signing a deed of accession, they can be registered as a shareholder of the company, and they will be bound by the same rules that are applicable to the existing shareholders.
Inclusions in an Accession Agreement
The agreement must clearly state the names of the parties between whom the agreement is entered into. The parties are usually the company and the new shareholder. The date on which the agreement is entered into must also be mentioned along with the territory in which the agreement is enforceable. In general, a deed answers the question “what is the accession condition” in a country.
The deed must include a clause stating that the new shareholder will agree to be bound by all of the obligations in the existing shareholders agreement. The deed must mention that all the existing shareholders and the company shall be entitled to enforce the shareholders agreement against the new shareholder.
How to Draft an Accession Agreement?
- Most companies usually have a template of the deed of accession attached to the shareholders agreement.
- The shareholders agreement may have some specific rules to be followed in case of a new shareholder. The parties have to make sure that all these rules are complied with when a deed of accession is created.
- Once the deed of accession has been created, both parties must review it thoroughly and then sign it.
- Each party must keep a copy of the deed for their own records. A copy should also be kept at the registered office of the company.
Benefits of an Accession Agreement
- The major benefit of a deed of accession is that the company is not required to draft a new shareholders agreement every time a new shareholder joins the company. This saves a lot of time and money from the parties by saving on legal fees.
- The deed of accession is a simple way of making sure that all shareholders are bound by the original shareholders agreement.
- Another benefit of the deed of accession is that it is enforceable by a court without the need to show that there was any consideration on the part of the opposite party.
Types of Accession Agreements
Apart from a deed of accession, accession agreements can have various formats and can fall under the purview of international law, civil law, or under property law.
- Under property law, it can mean that a person is acquiring the property that involves adding value to the property. It may also include cases where a person takes charge of another person’s property. The agreement can also be made when a person acquires property that is adjoining to his own.
- Under international law, accession can mean a process through which a country becomes a signatory to an international agreement.
Key Clauses in an Accession Agreement
The following are the key terms of this agreement:
- Acceptance of the new party
- Shares and shareholders agreement
- Acknowledgment by the new party
- Acceptance of liability by the new party
- Release of the selling shareholder
- Representations and warranties of the new party
- Covenants by the new party
- Stamp duty
- Applicable law and jurisdiction
What Happens in Case of Violation?
When this agreement is created, it becomes a part of the shareholders agreement. Therefore, a violation of a deed of accession can be deemed as a violation of the shareholders agreement. Hence whatever remedies are provided by the shareholders agreement for the breach of its clauses will become applicable in case of violation of an accession agreement.
An arbitration clause is present in most shareholders agreements and states that if a clause of the agreement is breached or if any dispute arises with respect to the terms of the agreement, the matter will be resolved by arbitration. The clause shall state the method of arbitration. Alternatively, any other form of dispute resolution, such as mediation or negotiation may also be mentioned in the agreement.
The agreement can also mention that all disputes arising out of the agreement will be subject to the exclusive jurisdiction of a specified court.
Sample for Accession Agreement
Download an accession agreement template here!
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This agreement is made between COMPANY-1 and COMPANY-2 on the effective date of 09th November, 2011. Company-1 represented by Ms. Kaisa Harms Address: 33501 S Dixie Hwy, Florida City, FL 33034 Contact number: (305) 242-4447 Company-2 represented byMr. Jason Newstead Address: 2100 88Th St, North Bergen, NJ 07047 Contact number: (201) 758-2810 Terms and Conditions:
- In this Accession Agreement, the expressions and words are defined for the purpose of the said agreement and not otherwise.
- The authorized person hereby admits the accession will be in effect from the date of signing this accession agreement based on the terms and conditions hereof.
- The authorized person representing the company agreeing to this accession hereby accepts all terms and conditions to be bound by the agreement with effect from the date of signing this accession agreement.
- The rights and obligations of the party agreeing to the accession and the party making this accession shall be construed accordingly with effect from the date of signing this accession agreement.
- This accession agreement and all the exhibits attached shall be read as well as construed as one document.
- This accession agreement may be executed in counterparts.
- This accession agreement shall be governed by as well as construed in accordance to the laws of the United States of America and both the parties hereby submit to the jurisdiction of the courts of United States of America only.
SIGNED FOR AND ON BEHALF OF COMPANY-1 BY: ……………………………………………………………. Name: SIGNED FOR AND ON BEHALF OF COMPANY-2 BY: ……………………………………………………………. Name: