QUESTIONNAIRE FOR [FOUNDERS] SHAREHOLDERS AGREEMENT

[OR INCORPORATED JOINT VENTURE]

IDENTITY OF THE INVESTORS

Please provide names, residential addresses and Passport numbers

of all individual founders and shareholders for purposes of
identification.

CAPITAL AND FUNDING1

How many initial shares will be issued? Will they be fully or partly
paid?

What will be the proportions of equity to be held by each of the

shareholders and the amount of initial investment by each party?

Will there be different classes of shares established to reflect

different interests or contributions of the shareholders?

Will there be any obligations on shareholders to make additional

finance available to the Company? Will there be any limit to that
obligation?

Will new shares be offered to shareholders in proportion to existing

shareholdings (any pre-emption rights)?

Will any default or dilution provisions apply if financial commitments

are not met by the shareholders?

Will the shareholders be required to give any guarantees to support

Company borrowing?

Will there be provision for ensuring that any liability under such
guarantees is borne in agreed equity proportions between the
shareholders?

BUSINESS OF THE COMPANY

What will be the nature of the activities carried on by the Company?

Will there be any geographical limitations placed on the joint

ventures operations?

Will there be a business plan and/or budget?

BOARD OF DIRECTORS

What rights will each party have to appoint directors?

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Will the other shareholders have the right to be consulted on the

proposed appointment of any new directors/will there be any
minimum qualification requirements for any new directors?

Will particular voting arrangements apply to matters specifically

reserved to the board and/or to any other matters?

Who will determine the appointment of any managing director or

any other executive directors?

SHAREHOLDER MEETINGS

What will the quorum and notice requirements for shareholder

meetings be?

Will any special voting rights attach to any of the shares?

MATTERS REQUIRING UNANIMITY OR A SPECIAL MAJORITY

Are there any specified matters that will require unanimity or a

special majority at board level?

Are there any specified matters to be reserved for decision by the

shareholders at shareholder level?

PROFIT DISTRIBUTION

What will be the dividend policy of the Company?

Should there be a minimum level of profits to be distributed or

retained each year?

How can the dividend policy be changed?

RESTRICTIONS ON SHAREHOLDERS AND COMPETITION

Will the shareholders be prohibited from competing with the

Company? If so, what territorial or other limitations should apply?

Will there be any exceptions for any existing activities of a party

that are not being contributed to the Company?

Will the shareholders have obligations to refer business to the

Company?

How long will the restrictions apply for - whilst a shareholder/after a

party ceases to be a shareholder in the Company and/or the
termination of the joint venture agreement?

Will
there
be
a
restriction
on
employees/customers of the Company?

What competition approvals are likely to be required for the

formation and operation of the Company (if any)?

any

party

poaching

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TRANSFER OF SHARES

Should the shareholders be permitted to sell their shares or should

the Company be wound up if any party wishes to sell out?

If transfers will be permitted, should the other shareholders have

pre-emptive rights before any sale to a third party takes place?

Should partial transfers be allowed - to connected persons or

generally?

Should any transfers be permitted free of pre-emption rights (eg

intra-group transfers or transfers to family trusts)?

Should there be any minimum period during which no sales to third

parties are permitted?2

How will shares be valued for the purposes of the transfer

provisions?

Should a tag along right (eg transferor must require the third party
purchaser to offer to buy the other shareholders interests at the
same price per share) or drag along right (eg transferor can oblige
the other shareholders to transfer their shares to the same
purchaser) be included?

SERVICES AND EMPLOYEES

Will any of the shareholders be providing services to the Company

and if so will a fee be paid?

Will any services be documented by way of separate agreement?

Will the Company have its own employees?

Are service contracts required and are there particular individuals

with key roles in the joint venture calling for special treatment?

DEADLOCK

What will constitute a deadlock issue?

What mechanisms will be included to assist the shareholders in

resolving any deadlock issues - reference to chairman/chief
executives of each party/mediation/arbitration/ expert?

TERMINATION

Is the joint venture for a fixed term or indefinite duration?

Are there any circumstances in which the joint venture will

automatically terminate (eg loss of a regulatory approval, the
transfer of any partys shares)?

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Can a party give notice of termination (leading to liquidation unless

otherwise agreed) after a minimum period or is exit solely by
transfer of shares?

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The parties will need to consider what the desired ratio of equity to debt for the balance sheet of the Company
should be. There may be advantages in debt financing, on the other hand it may be necessary to demonstrate a
stronger balance sheet for the purposes of market perception or the ability to raise outside finance. A commercial
decision will also be necessary, in the case of debt finance, as to how much should be raised by outside loans and
how much (if practical) from the shareholders themselves. Where the rate of interest on an outside loan is less than
the return which the Company can generate on those funds, there may be attraction in allowing the Company to
gear up with outside loans.
This will be particularly appropriate in the case of a new business.