Question from sanam, Is the Forfeiture of MLSP’s Share Compliant with SSA?
Answer from AI:
Understanding the Share Subscription Agreement (SSA)
A Share Subscription Agreement (SSA) is a contract between a company and an investor, where the investor agrees to purchase shares of the company under specific conditions. In this case, the SSA outlines that MLSP must meet an EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) target of NPR 300 million within two years of the second instalment to receive the third instalment of NPR 100 million.
Failure to Meet EBITDA Target
According to the Civil Code of Nepal, 2074, each party must adhere to their contractual obligations. Specifically:
- Section 521: This section mandates that parties must fulfill their contractual duties as agreed.
- Section 522: This section states that if a contract requires simultaneous performance of obligations, and one party is unwilling to fulfill their material obligation, the other party is not required to perform their part of the agreement.
In this scenario, the SSA explicitly required MLSP to achieve an EBITDA target of NPR 300 million. The company achieved an EBITDA of NPR 299.96 million, which is very close but does not meet the exact target.
Legal Implications of Not Meeting the Target
Since the agreement required the exact target to be met, failing to achieve NPR 300 million means that MLSP did not fulfill its contractual obligation. This failure can lead to the forfeiture of MLSP’s share as per the terms of the SSA.
Relevant Case Law
In Nepalese practice, the requirement for specific performance of a contract is supported by case law, such as in Dhanmaya Maharjan v. Tulasi Maharjan (2062). This case emphasizes that parties must perform their contractual obligations as specified.
Consulting a Legal Professional
Given the complexity of contract law and the specific terms of the SSA, it is crucial to consult with a legal professional to understand the full implications of the share forfeiture. A lawyer can provide personalized advice based on the specific details of the agreement and the circumstances surrounding the failure to meet the EBITDA target.
Steps to Take
If you are involved in a similar situation, consider the following steps:
- Review the SSA thoroughly to understand all conditions and obligations.
- Consult with a legal professional to get personalized advice.
- Gather all relevant financial documents and evidence of performance.
- Discuss potential remedies or renegotiations with the other party if possible.
Additional Resources
For more information on contract law and specific performance, you can refer to the following resources:
Remember, while general information can be helpful, it is not a substitute for professional legal advice tailored to your specific situation.
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