CANCELLATION POLICY

A cancellation policy for shares typically applies in limited contexts, such as during initial offerings (e.g., IPOs), private placements, or specific share agreements. Shares cannot generally be "canceled" once purchased, but there are scenarios where cancellation or reversal may occur. Here's a breakdown:

1. Publicly Traded Shares

• No Cancellation: Shares purchased through a stock exchange cannot be canceled. Instead, you must sell them on the market at the prevailing price.
• Erroneous Transactions: If a trade is executed in error, exchanges may have mechanisms to reverse or cancel the transaction under strict conditions.

2. Initial Public Offerings (IPOs)

• Cooling-Off Period: In some jurisdictions, investors may withdraw their application for shares before the IPO closes. This is a regulated provision aimed at protecting investors.
• Unallotted Shares: If you apply for IPO shares but do not receive an allotment, the invested amount is refunded, effectively "canceling" the transaction..

3. Private Placements and Private Company Shares

• Defined Cancellation Terms: The purchase agreement or shareholder agreement may outline cancellation rights under specific circumstances, such as:
• Fraud or misrepresentation by the issuing entity.
• Withdrawal during a cooling-off period (if applicable in the jurisdiction).
• Company-Initiated Cancellation: Companies may cancel share agreements if an investor fails to meet payment or other obligations.

4. Crowdfunding or Startup Investments

• Cooling-Off Periods: In regulated crowdfunding platforms, investors often have a limited time to cancel their investment after committing funds.
• Campaign Failure: If a fundraising campaign does not meet its target, shares are not issued, and funds are returned to investors.

5. Employee Stock Options (ESOPs)

• Cancellation Upon Termination: If an employee leaves the company before exercising their options, unvested shares are typically canceled.
• Company Rights: Companies may have the right to cancel shares under certain conditions, such as breach of contract.

6. Legal and Regulatory Considerations

• Jurisdiction-Specific Rules: Securities laws in some countries may allow cancellation rights in specific scenarios, like fraud or material misrepresentation.
• Court Orders: Shares may be canceled or reversed due to legal disputes, regulatory orders, or insolvency proceedings.

Drafting a Cancellation Policy

If you need to create a cancellation policy for shares (e.g., for a private company or offering), here are key elements to include:

• Conditions for Cancellation: Outline situations in which cancellation is permitted (e.g., fraud, non-payment, regulatory issues).
• Process for Cancellation: Specify how investors or the company can initiate the cancellation process.
• Timeframes: Include any deadlines, such as cooling-off periods.
• Refund Terms: Define whether and how funds will be refunded in case of cancellation.
• Legal Compliance: Ensure the policy aligns with securities laws in your jurisdiction..