Introduction to call_and_put_options

Jun 28th, 2015
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Abraham Lincoln University
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For a clearer understanding the meaning of “Put Option” is required to be probed into. A “Put Option” as understood in common parlance is an option to sell. A “Put Option” is an Investor’s exit/liquidity option by way of which an Investor can, on the happening of a “Put Trigger” event, compel the promoter/ shareholder of Company to buy its shares either wholly or partly, at a valuation, agreed between the parties. A “Put Option” has become a popular exit option in business practice and has found expression by way was a “Put Option” Clause in Share Holders Agreement (SSA) or Share Subscription Agreements (SHA). This right to sell is not vested in a shareholder by way of law but is a creation of contractual arrangement between the parties. Thus if “Put Option” is not provided in the SSA or SHA then the investor/ shareholder cannot exercise such right to sell.

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Enforceability of Put Option in Shareholders Agreement or a Share Subscription AgreementFor a clearer understanding the meaning of Put Option is required to be probed into.A Put Option as understood in common parlance is an option to sell. A Put Option is an Investors exit/liquidity option by way of which an Investor can, on the happening of a Put Trigger event, compel the promoter/ shareholder of Company to buy its shares either wholly or partly, at a valuation, agreed between the parties. A Put Option has become a popular exit option in business practice and has found expression by way was a Put Option Clause in Share Holders Agreement (SSA) or Share Subscription Agreements (SHA). This right to sell is not vested in a shareholder by way of law but is a creation of contractual arrangement between the parties. Thus if Put Option is not provided in the SSA or SHA then the investor/ shareholder cannot exercise such right to sell.The only way the legality of Put Option can be questioned is whether a contract which provides an option to the Investor to sell his shares to the Promoter at a consideration fixed on a date where the performance is to be done on a later date, amounts to a forward contract which is prohibited under Securities Regulation Act, 1956.For a comprehensive understanding of this issue the concepts restriction on transfer of shares, meaning of forward contract, meaning of spot delivery cont

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