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Agreement of Assigning Shares: Frequently Asked Questions

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What’s a share assigning agreement? 

A share assigning agreement is a type of contract used in the transfer and assignment of ownership to shares or stocks in a company. 

Who are parties involving an agreement for assigning of shares?

The parties to share assignment agreements are the sellers and purchasers. 

How does an agreement of assigning shares differ from a share repurchase agreement?

A company or corporation may redeem shares through the repurchasing of the said stocks from existing shareholders and placing the same shares to the name of the corporation. This is implemented typically by larger or bigger corporations. It’s usually only performed when a company already has enough money in buying back the shares while still being able to cover the operational costs. The redeeming of shares gives equity back onto a corporation, resulting to the increase of value to the remaining shares. 

As for an agreement of assigning shares, it is the transfer of ownership of shares between different individuals or businesses. 

How does a purchase of shares differ from a shareholder loan?

When a stakeholder purchases shares, this said stakeholder boost the firm’s equity. When stakeholderes create a shareholder loan onto the business, it’s debt that is owed to stakeholders by the corporation as if both were individuals instead of businesses. Take note: the debt is to be settled; however, it does not boost equity of stakeholders in the firm. 

What exactly is a first refusal right?

A first refusal right is when current shareholders wish to put their shares or stocks for sale, all shares are to be offered to the other stakeholders first on pro rata basis, enabling all current shareholders in gaining a percentage stake onto a firm prior to being set up for sale to other parties. First refusal rights protect all the current stakeholders from any unwelcome new shareholder. 

If the corporation or existing shareholders are not able to purchase the shares for their own, then the shares can be sold to third parties. The existing shareholders will then end up with new co-owners or shareholders. A shortcoming with the first refusal right is it causes a long delay with regards to the sale of stocks to a corporation. 

Why is there a need for a professional valuator?

Shares that are not trade publicly on the stock market can be hard to valuate as they are not convertible to cash as easily. Valuation of shares that is done without the help of an expert can lead to over or under valuation with respect to the share price. 

Any mistake will prove to be detrimental to a company down the line, plus it can affect all existing shareholders. An expert in the matter will be able to provide ra more precise valuation that’s fair onto all shareholders to a corporation. The valuation, take note, can be expensive; therefore, it is a must to consider carefully whether to use the services of a professional valuator or not. 

What’s a dividend?

Dividends are shares of the profits of the corporation that will be given to shareholders at specific intervals. A dividend is paid on a share basis. For instance, $1 per share. It is used in giving shareholders positive returns for holding shares. 

Corporations may pay our any percent of the profits as dividends. Most pay out just a portion of the profits of the corporation in order for the company to have assets for business growth, business loses in the following years, capital expenditures, and unexpected expenses.

Who has to sign an agreement for assigning shares in UAE?

The party that is assigned the shares ownership, as well as the party assigning shares ownership are the ones that are to sign the contract.

Does the signor and signee have to sign before a notary public for the agreement?

This will large depend on the trust between the parties that are involved with the agreement of assigning shares. If there is suspicion that any of the two parties will deny having seen or having signed the agreement for assigning shares, then the signatures are to be witnessed by a notary public in UAE. 

It is also advised that a notary public in UAE is involved even when there is trust between the parties to the contract. Thins is to ensure the validity of the agreement. 

Do the parties’ signatures have to be notarized by a public notary in UAE?

Again, this is largely depending onto the fact that the parties trust and know each other well. If there’s any conflict in the past or there is dispute that can be foreseen with regards to the agreement, then it is best to have a local notary public witness the signing of the agreement of assigning of shares in UAE. If there is trust between parties, the notarization isn’t necessary but still recommended.  

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