The appointment sheet, shareholder contract and subscription contract, which are collectively referred to as final agreements, are intended to introduce an MFI on provisions that are common in the participation issue documents, as well as the reasons why these provisions are requested by an MFI and/or an investor in an MFI and the potential impact of the provisions on MFIs and/or investors. The final agreements do not exhaust all the provisions that are typically contained in the documents used in the issuance of stakes by an MFI. Since the purpose of the final agreements is to explain many of the common provisions contained in these agreements, the final agreements contain provisions that do not favour the MFI. As a result, an MFI may attempt to oppose the inclusion of many of these conditions in the negotiation process of its final agreements. In some cases, alternative proposals are proposed, which could be more favourable or, at the very least, more neutral for the MFI. An IFM issuing shares may find that its potential investors will propose to use their own forms of agreements as a basis for trading, and these forms may deviate significantly from final agreements. However, understanding the basic provisions of these final agreements should be an MFI offering a better basis for negotiating the terms of other types of agreements that an investor can propose. In addition, final agreements are based on general legal practices and principles and are not based on the law of a particular jurisdiction, and have been developed as a learning tool for a general public. An IFM will no doubt find that the law and practices of different countries are very different in the way an institution can issue shares, the nature of the securities that can be issued and the rules governing the relationship between the IFM and its investors. Therefore, any IFM considering an offer of shares should consult with local legal advisors and financial advisors on the specific terms of a share bond proposal based on its specific business requirements, local practices and legal requirements.
The aim of this guide is to familiarize microfinance institutions (MFIs) with some of the issues that are often addressed when negotiating equity contributions by outside investors. In order to facilitate this understanding, this guide contains an example note on the Term Sheet share offering (the document often used by an MFI in the early stages of a share merger negotiation), as well as a shareholder agreement and a underwriting listed shares (two relatively common documents executed by an MFI with outside investors in order to predict the terms of a proposed investment and to regulate the relationship between the IFM and investors as soon as an investment is made).