5 BRUTAL POINTS TO TAKE CARE OFF WHILE RAISING INVESTMENT

By Paras Mehra

www.Quickcompany.in

Aakash Saxena (changed name), a former technical head of a

very famous travelling website, quits a 1cr package for a startup

which he feels worth millions. He, with his other partner, founded

a venture, a platform for hotels to start their own websites. In 3

months, there venture started to pick up and hence they decided

to form a company. They want a less regulated country, so they

decided to form a company in Singapore instead of India. In the

mean time, they look for venture capitalists to raise investment

and they did find some but they declined because offer wasn’t

lucrative.

Amit, the other partner and the holder of 75% share capital of the

company, decided to have a shareholder agreement between him

and Asheesh. Asheesh has no knowledge about the legal, so he

went to Quickcompany.in for help. If investment is to be raised,

then this shareholder agreement plays a very important role,

because whatever is written in the agreement is binding on both

the shareholders and can sometimes proven very harmful if not

drafted carefully.

When we vetted the shareholder agreement, we find 5 clauses

which can steal the celebration of raising investment from the

shareholders. We pointed out that 5 clauses and told to Asheesh

to either amend or delete the clauses from the agreement.

Since, this era is moving very fast for start ups and millions of

dollars are being invested, so we tried to share our experience

with you all and to caution you from these 5 points which every

founder should look into the shareholding agreement while getting

into it.

1. DRAG ALONG CLAUSE: Drag along clause favors the

major shareholders. This right enables the major

shareholder to compel the other shareholder to sell their

shares even if the other shareholder/s doesn’t wants to.

As the name suggest, it allows the major shareholder to

drag the other shareholders along.

Imagine a scenario, where you hold 49% of the ownership

and other one holds 51%. The major shareholders wants to

sell the ventures as he wants to move forward to another

idea, but the you, because you have putted everything into

the venture don’t want to sell as you believes in this idea. In

this situation, if you have signed the shareholding agreement

which has this DRAG ALONG CLAUSE, then you have no

right to oppose and you will have to sell your shares as well.

Sometimes, this clause may be useful to you. In case you

holds 90% ownership then you don’t want that other 10%

holder should intervene if you wants to sell the ventures,

because VC’s sometimes rejects the funding proposal if you

do not offer 100% ownership shares.

These types of cases happen, so always take care of this

clause while signing the shareholding agreement.

2. TAG ALONG CLAUSE: Now this clause is designed to

protect the minority shareholder from being left behind when

a majority shareholder decides to sell. As the name suggest,

it gives the right to the minority shareholders to join the deal

and sell their stake at the same terms and conditions as

would apply to the majority shareholder.

This clause is very important especially for the minor

shareholder. In order to protect your interest, you need to

look into this clause and always be cautious.

3. PRE EMPTION RIGHT: In business terms, it is a contractual

right to acquire new shares before it can be offered to any

other person or entity. It is also called “first option to buy.”

This right will protect you from stock dilution which is always

a concern for every business founders.

Remember the case of facebook.com, where the shares

of co founder Eduardo Saverin has been reduced from

34% to 0.03%, and the important thing is that he didn’t

even get to know when did his shares were diluted.

However, you can protect yourself by entering this clause

into the shareholder agreement.

4. RIGHT OF FIRST REFUSAL: In business terms, this clause

gives the right to the existing shareholder to claim damages

in case any shareholder sells his shareholding to the third

party without offering them. This right protects the existing

shareholders from intrusion of any unknown person into the

board and ownership of the company which they do not

wants to.

This right might also helps the existing shareholders to

increase their percentage of ownership into the business at

the pre determined price which they can also agree through

this clause.

5. PERMITTED USE: Finance is the lifeline of any business

and hence its use should be optimum. This clause gives the

right to minor shareholders to restrict the use of funds of the

company in any matter or area which they think is prejudicial

to their interest.

Understand this by way of example: suppose Mr.A has

invested around 80 lakh in the business which only worth

20% of the capital, in this case, there is a risk to Mr.A, that

other shareholders might use the funds in area’s which Mr.A

thinks is prejudicial to him, then he can use the power of this

clause to restrict the use of funds in any particular area.

We have tried to use the language as simple as possible to make

the entrepreneurs understand the important aspects while raising

investment. Apart from the above, there are certain other clauses

are also there which also can also prove vital in your business. It

is your business, it is your world, be cautious and go and win the

world.

(Paras Mehra, is a practicing Chartered Accountant, entrepreneur

expert and also a founder of www.Quickcompany.in, a leading

website for registering companies in India.)

Contact Details:

paras@quickcompany.in or +91 9654622792

How to regrow vegetables in Kitchen

Image how great your kitchen will look with indoor plant and it would be even great if these plants are grown by recycling the vegetables which you have already used.
Below are some great solutions for your kitchen garden.

 Just cut the root side of the onion and put in the soil and see the green plan growing in few days.

 The top green side of the pineapple should be cut and put in the sand under direct sunlight and try your luck. You may get pineapple or a nice looking plant

Immerse the potato and root side part of carrot in water and nice shapes leave you can see which will add beauty to your kitchen.

After a few weeks, green shoots will begin to appear and you can snip these as they grow to season your dishes.

How to recycle Men's Formal shirts at home

Materials Required - Men formal Shirts and Sewing machine

I found these great pictures on line and thought to share it with you guys to bring out your creativity at home. Why throw old shirts at home when you can change it to trendy and fashionable clothes for yourself.
Here are few pic which will help you get some Do-it-yourself ideas.

If you get more photographs please share it here in the comments section.

Cheapest Wedding Locations and Marriage Halls

What most of the people think are the costliest option like a Resort for Marriage sometime turns out to be the most cheapest option if you are smart negotiator. Routine way to get married in India is to book a conventional hall or small hotel with 100-300 capacity hall and conduct marriage. But if you think little bit out of the box you can end up with lot of innovative classy and elegant ways to finalize you Dream Marriage Location which comes way below your budget... HOW??

Let me explain some of the fun Creative and inexpensive wedding location

• Resorts

Resort Wedding Bangalore

Let it be in Bangalore or any other city for that matter, there will be some Resort or Hotel which will be running in loss. You have to first talk to the Resort Manager in a way that he feel if he gives you a heavy discount for conducting marriage his Resort get lots of publicity and will get future customers if wedding ceremony goes well. i tried it and the manager who quoted somewhere around 4000 per person (includes stay, 4 meals) after negotiation it came down to 1000 per head, which became the cheapest option available for us to get married. As we enquired Marriage halls in Bangalore where minimum rent for a day was 1Lakh, our stay and food arrangements got over in less than that! Picture shows the resort where i got married.

• Restaurants

Talk to your favorite restaurant to see how much it would cost to rent a private room or even the whole place. Look for a restaurant with a pretty back garden that you can set up for the ceremony, and can be used for dancing later. This is an option that works best during non-peak hours, as the restaurant might not want to lose their busy Weekend crowd.

•  Parks

If you can manage to decorate the location appropriately many city parks allow you to have a wedding there for a nominal fee. Look for ones that have a covered patio, special details like fountains, or grassy picnic areas

• Your College 

Atleast you dont have to explain to anyone about you cheap option, instead you can say jus Nostalgic ;)  It's usually very cheap for alumni to have their weddings on campus and sometimes not much more for non-alumni. Just make sure it's picturesque - we're talking ivy-covered halls and green hills, not barren concrete industrial buildings.

• Destination Wedding

This means plan a trip to your favorite location with all your relatives and friend whom you wanna invite for the wedding and plan a simple Wedding in a temple or a beach or a riverside and have memorable wedding ceremony. If you manage and plan properly budget will bein limit too.

Cheapest Wedding Invitations which looks Elegant and Costly

To have a Dream and Classy marriage your invitations should match your marriage theme. This doesn't mean to burn a hole in your pocket, instead if you are little creative and can shop in the right places from where you get your Wedding invitations done, you can save a lot of money.                                         For example: 

• Search for the whole sellers of invitation cards in your city which you can somehow find in Just dial or Google... in Bangalore Sultan pet and cotton-pet are the place where you get Cheapest wedding cards. 

• 1000's of variety available from which you can choose the cheapest design possible and also buy some extra accessories if you want like pearls decorative ribbons, Golden leaf, small Ganesha idol and multicolored threads which you can later tie it around your card to make it more stylish. if you buy ready made cost, will shoot up. 

• Variety of paper quality also will be available which you can choose according to your taste and budget
• These cards are charged at per card rate but if you buy in bulk say 500 to 1000 numbers cost go down.

•  Now when it comes to printing your names and venue details on the cards various printers charges somewhere Rs.1 to Rs 5 per cards depending on the paper quality and its delicacy. 

• So if you go for a simple white color cards with attractive accessories cost will be quiet less 

Reasons to go for a Cheap wedding and budget Marriage

• Simply because you are Smart ;)
• Spend less money on your wedding in order to enjoy a bigger, better honeymoon.
• You are Smart and want to buy good investment instead of spending it on your marriage
• Your parents dont want to spend money because you have selected the Girl/Boy against their choice(this can be the main and important reason for Frugal wedding ;)
• You dont belive in fake show off
• You have very good communication skills and can get good bargain
• You dont have much savings and economy looks bad, Jobs in danger
• Dont want to take personal loan for marriage
• You like simple Marriages
• You are way to smart to make your wedding look Classy and Luxurious in very less budget
• You have excellent friends who can help
• You wanna have a different and unique style of wedding
• You know the best vendors
• You have lot of time to do complete research on best resources available

If you have lot of Money staying idle in your bank account and dont know what to do with it, you can happily go ahead and have a Big Fat Indian Wedding this article not for you.

Cheap Wedding Planing or Budget Marriage

shhhh Cheap wedding planing sounds so cheap. But friends if all the wedding expense were to be taken by our parents this question about marriage Budget doesnt comes into picture..... But if it is we who have to take the complete expense of the marriage we youngsters have to plan a lot of thing and first of all in our life it will be Cheap Wedding or marriage. In India even thinking like this also is considered kanjoos coz marriage is one ocassion where people spend maximum money, from childhood our society and culture sells us a dream about Big Fat Indian wedding.

simple wedding with only friends

But there are some smart people like me in India who want an exquisite wedding at excellect budget. Cheap doesn't always mean that marriange wont be classy... "Cheap wedding means finding the smartest options to conduct your wedding in a style. " In todays world you will find lot of people Brand Crazy which i will never be able to understand, and this trend has made the life of middleclass people difficult. With our limited income we have the responsibility to manage so many things, so being smart and budget oriented is our last option.

Coming to the Cheap wedding planning what are all the things which you have to keep in mind: First of all decide who will be organizing your wedding, if you are the person who is very busy in office or job and dont want to hire a wedding planner to save some money, its always better to rely on your friends (believe me there is lot of work in conducting a marriage) who come very handy in love marriages where you are the sole expense taker, your parent will agree to attend the marriage but wont spend a penny.  And then you will have to the decide what kind of marriage you will be having, who all will be invited, theme of the wedding, and most importantly the budget. i got married recently and it was in a Resort in Bangalore, very nice wedding which looked very costly but my expense came to only 1 Lakh. So i got lot of tips to share with my readers which will be surely helpful in this gloomy economy, to save a fortune!