Shareholders Agreement (India)
This is a standard shareholders agreement template for a private company, specifically designed for two primary equity partners. It outlines the management structure, share transfer restrictions, board representation, and financial arrangements including loan repayments and profit distribution.
SHAREHOLDERS AGREEMENT
BETWEEN
____________________
AND
RE: Shares of ----------------------Pvt. Ltd.
THIS AGREEMENT made the ____ day of ______, 2003 BETWEEN MR_B residing at _____________________ (hereinafter referred to as "A") (which expression shall, unless repugnant to the context or meaning hereof, mean and include his heirs, executors, administrators and assigns) of the First Part.
And
MR. B residing at __________________________(hereinafter referred to as "B") (which expression shall, unless repugnant to the context or meaning hereof, mean and include his heirs executors, administrators and assigns) of the Second Part.
And
________________________ (P) LTD., a Company incorporated under the Companies Act, 1956 and having its registered office at _____________________ herein represented by its ___________ (hereinafter referred to as "XYZ") which expression shall, unless repugnant to the context or meaning hereof, include its successors and assigns) of the Third Part;
WHEREAS:
A. A and B hereto have agreed to jointly manage a company in India named "XYZ Pvt Ltd ";
B. A and B have agreed to become Equity Partners by investing in the shares of the Company subject to the condition that they shall enter into a Shareholders Agreement in terms of these presents;
C. The Company "XYZ PVT. LTD. " has been requested to, and has agreed to, join in the execution of these presents and to take this Agreement on record so that it is aware of the rights and obligations of A AND B, the parties hereto and ensure that they comply with the same;
D. The parties hereto are desirous of recording the terms and conditions of their Agreement in writing;
NOW IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:-
1.
a. A and B shall jointly invest in the Company which is an existing company limited by shares under the Companies Act, 1956 and known as "XYZ PVT LTD".
b. The registered office of the Company shall be situate at ________________, or at such other places as may be mutually agreed upon between the parties in writing.
c. The Company shall carry on the business of running and managing restaurants and (Description of the business and complete address), either by itself or through other agencies or company industries and may carry on any other business as may be decided by B hereto and shall ensure that no other business activity is undertaken by the Company at any time without the consent of A hereto.
2. The authorised share capital of the Company is Rs.________/- (Rupees ___________________ only) consisting of ______________ (________) equity shares of Rs.10/- (Rupees ten) each.
3. The subscription by A hereto to the aforesaid authorised share capital of the Company shall be 1,00,000 (One lakh) equity shares of Rs.10/- (Rupees ten only) and the subscription by B to the aforesaid authorised share capital of the Company shall be 1,00,000 (One lakh) equity shares of Rs.10/-(Rupees ten only).
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About this template
What is this template?
This document is a formal agreement between the owners of an Indian private limited company to manage internal operations and exit strategies. It contains specific 'Reserved Matters' and 'Tag-Along' rights that are not typically found in standard Articles of Association. It is not a Share Purchase Agreement, as it focuses on ongoing governance rather than a one-time sale.
When should you use it?
Use this document when two or more parties incorporate a company in India or when a new investor joins the cap table. If the intent is only to transfer existing shares without changing governance, use a Share Transfer Deed instead.
What's inside
| Clause | Name | What it does |
|---|---|---|
| Clause 3 | Board of Directors | Specifies the maximum and minimum number of directors and the specific rights of major shareholders to appoint or remove their nominees. |
| Clause 5 | Reserved Matters | Lists specific corporate actions that require the affirmative vote of a super-majority or specific named shareholders. |
| Clause 7 | Transfer of Shares | Imposes restrictions on share sales, including Right of First Refusal (ROFR) and Tag-Along rights for minority investors. |
| Clause 8 | Pre-emptive Rights | Grants existing shareholders the right to purchase new shares in proportion to their current holding during future funding rounds. |
| Clause 10 | Information Rights | Obliges the company to provide audited annual financial statements and monthly management reports within 30 days of the period end. |
| Clause 15 | Governing Law and Jurisdiction | Subjects the agreement to the laws of India and designates the courts of a specific city for dispute resolution. |
Who it's for
- founders of a private company in India bringing on new equity investors
- shareholders in an Indian entity seeking to restrict the transfer of shares to third parties
- investors requiring veto rights over specific board decisions in a Bangalore-based startup
How long it runs and how it's signed
Law it's drafted under
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