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Subscription And Shareholders Agreement Template for India

A comprehensive legal agreement governed by Indian law that combines elements of both a share subscription agreement and a shareholders' agreement. It regulates the terms of investment into a company and the subsequent relationship between shareholders. The document outlines the conditions for share subscription, payment terms, representations and warranties, governance mechanisms, shareholder rights and obligations, transfer restrictions, and exit provisions. It ensures compliance with Indian corporate law while protecting investor interests and establishing clear protocols for company management and decision-making.

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What is a Subscription And Shareholders Agreement?

The Subscription And Shareholders Agreement (SSHA) is a fundamental document in Indian corporate transactions, typically used when a company is raising capital through the issue of new shares while simultaneously establishing the framework for shareholder relationships. This hybrid agreement is particularly relevant for private equity investments, venture capital funding, or strategic investments in private companies. It combines the immediate need to document the share subscription process with the long-term requirement of regulating shareholder relationships. The agreement must comply with Indian corporate law, particularly the Companies Act 2013, SEBI regulations (if applicable), and foreign investment laws if international investors are involved. It includes crucial elements such as investment terms, governance rights, share transfer restrictions, exit mechanisms, and minority protection provisions.

What sections should be included in a Subscription And Shareholders Agreement?

1. Parties: Identification of all parties including the Company, existing shareholders, and new investors

2. Background: Context of the investment, company's business, and purpose of the agreement

3. Definitions and Interpretation: Detailed definitions of terms used throughout the agreement and rules of interpretation

4. Subscription Details: Terms of subscription including number of shares, price, and payment mechanics

5. Conditions Precedent: Conditions that must be satisfied before completion of the investment

6. Completion: Steps to be taken at closing of the investment

7. Representations and Warranties: Statements of fact and assurances from the Company and existing shareholders

8. Board Composition and Management: Structure of the board, appointment rights, and management provisions

9. Reserved Matters: Decisions requiring special approval from investors or specific shareholder groups

10. Transfer Restrictions: Limitations on transfer of shares and exit provisions

11. Tag Along and Drag Along Rights: Rights of shareholders to join in or be forced to join in share sales

12. Pre-emptive Rights: Rights of existing shareholders to maintain their percentage shareholding

13. Information Rights: Investors' rights to receive financial and operational information

14. Covenants: Ongoing obligations of the Company and existing shareholders

15. Term and Termination: Duration of the agreement and circumstances for termination

16. Confidentiality: Provisions for maintaining confidentiality of company information

17. Dispute Resolution: Mechanism for resolving disputes between parties

18. General Provisions: Standard boilerplate clauses including notices, amendments, governing law

What sections are optional to include in a Subscription And Shareholders Agreement?

1. Anti-dilution Protection: Protection for investors against future down rounds, used when investing in early-stage companies

2. Liquidation Preference: Preferential rights on liquidation, typically included for private equity or venture capital investments

3. ESOP Provisions: Details of employee stock option plan, included if company has or plans to have ESOP

4. Strategic Rights: Special rights for strategic investors, included when strategic investors are involved

5. Put Option: Right to sell shares back to promoters, included for investors requiring exit assurance

6. Non-Compete and Non-Solicit: Restrictions on competitive activities, included when founders are key to business

7. IPO Rights: Rights related to public listing, included if IPO is contemplated

8. Foreign Investment Compliance: Special provisions for foreign investment compliance, needed with foreign investors

What schedules should be included in a Subscription And Shareholders Agreement?

1. Schedule 1 - Details of the Company: Corporate information, shareholding pattern, and capital structure

2. Schedule 2 - Subscription Details: Detailed breakdown of investment amount, share price calculation, and shareholding post-investment

3. Schedule 3 - Conditions Precedent: Detailed list of conditions to be satisfied before completion

4. Schedule 4 - Completion Requirements: Detailed closing checklist and required documentation

5. Schedule 5 - Warranties: Comprehensive list of warranties given by the Company and existing shareholders

6. Schedule 6 - Reserved Matters: Detailed list of matters requiring special approval

7. Schedule 7 - Group Structure: Corporate structure including subsidiaries and group companies

8. Schedule 8 - Material Contracts: List of important contracts and arrangements

9. Schedule 9 - Intellectual Property: Details of company's IP rights and registrations

10. Schedule 10 - Disclosure Schedule: Exceptions and qualifications to the warranties

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

India

Publisher

Ƶ

Cost

Free to use

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