Who should be parties to the agreement?

Mergers and acquisitions
Contracts

I occasionally come across the following oversight in shareholders’ agreements and joint venture agreements.

Scenario 1

The cover page and signing page of the agreement state that the parties to the agreement are Party A and Party B only. However, the recital states Party A, Party B and the company (i.e. the subject matter of the agreement) have entered into the agreement. There are also provisions in the agreement which grants rights and imposes obligations on the company.

Scenario 2

The agreement states that the parties to the agreement are Party X, Party Y and the company (i.e. the subject matter of the agreement). However, the agreement does not grant any rights or impose any obligations on the company.

In the agreements above, questions arise as to whether the subject matter company is/should be a party to the agreement.

If the intention is to grant rights and impose obligations on the subject matter company, it should be included as a party to the agreement. This should also be reflected on the cover page and signing page.

Otherwise, there is no need to include the subject matter company as a party to the shareholders’ agreement or joint venture agreement.

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This post was first posted on Linkedin on 17 January 2021.

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