Underwriting Agreement Template for India

A Underwriting Agreement is a crucial contract between a company issuing securities and investment banks that manage the public offering process in Indian capital markets. It spells out how investment banks will buy and resell shares to the public, typically during an IPO or follow-on offering under SEBI guidelines.

The agreement sets the offering price, underwriting fees, and key timelines while protecting both parties through specific warranties and indemnities. For companies going public in India, this document creates the legal framework for transforming private shares into publicly traded securities, with underwriters usually guaranteeing to purchase any unsold shares as per the Securities Contracts Regulation Act.

Companies need a Underwriting Agreement when raising capital through public offerings in India's securities markets. This is especially crucial during IPOs, follow-on public offerings, or rights issues where you're working with investment banks to distribute shares to the public.

The timing to create this agreement comes early in the offering process, typically after selecting your underwriters but before filing final SEBI documentation. It's essential when you need guaranteed placement of your securities, want to transfer price risk to underwriters, or require professional help managing the complex distribution process. Many growing companies use it to ensure their public offering succeeds in meeting minimum subscription requirements.

• Firm Commitment Underwriting: The most common type in India where underwriters guarantee to buy all securities and assume full market risk, offering maximum security to the issuing company
• Best Efforts Underwriting: Underwriters commit to sell as many shares as possible without guaranteeing full placement, typically used for riskier offerings
• Standby Underwriting: Underwriters agree to purchase any leftover shares after the initial public offering, providing a safety net
• Syndicate Underwriting: Multiple investment banks form a group to spread the risk, common for large IPOs in Indian markets

• Issuing Companies: Organizations looking to raise capital through public offerings, responsible for providing accurate disclosures and meeting SEBI requirements
• Investment Banks: Lead underwriters who structure the deal, manage risk, and distribute securities to investors
• Legal Counsel: Both company and underwriter attorneys who draft and negotiate the agreement terms, ensuring regulatory compliance
• SEBI Officials: Regulatory authorities who review and approve the agreement as part of the offering documentation
• Stock Exchanges: Bodies like NSE and BSE that facilitate the listing and trading of the securities post-agreement

• Company Details: Gather financial statements, corporate authorizations, and SEBI registration documents
• Offering Specifics: Define security type, issue size, price band, and underwriting terms
• Due Diligence: Compile business plans, risk factors, and market analysis for accurate representations
• Underwriter Information: Collect credentials, commission structure, and distribution commitments from selected banks
• Timeline Planning: Set key dates for filing, marketing, subscription, and listing phases
• Compliance Check: Ensure alignment with SEBI guidelines, Companies Act requirements, and stock exchange rules

• Parties & Recitals: Complete details of issuer, underwriters, and their legal capacities
• Securities Description: Precise details of shares or securities being offered, including quantity and price
• Underwriting Terms: Commission structure, risk allocation, and distribution responsibilities
• Representations & Warranties: Issuer's business condition, legal compliance, and disclosure accuracy
• Conditions Precedent: Requirements for closing, including regulatory approvals and documentation
• Indemnification: Protection mechanisms for both parties against potential losses or claims
• Termination Rights: Specific circumstances allowing agreement cancellation
• Force Majeure: Market disruption and unforeseen event provisions per Indian contract law

A Underwriting Agreement differs significantly from a Bond Purchase Agreement in Indian securities law, though both deal with raising capital. The key distinction lies in their scope and application. While underwriting agreements cover various securities and typically involve IPOs or follow-on offerings, bond purchase agreements specifically focus on debt instrument transactions.

• Purpose and Scope: Underwriting agreements cover broader security types and distribution mechanisms, while bond purchase agreements solely handle debt securities
• Risk Structure: Underwriting agreements often include complex risk-sharing arrangements among multiple underwriters, whereas bond purchase agreements typically involve direct purchases by institutional investors
• Regulatory Framework: Underwriting agreements must comply with comprehensive SEBI guidelines for public offerings, while bond purchase agreements follow simpler debt market regulations
• Distribution Process: Underwriting agreements include detailed marketing and distribution plans, but bond purchase agreements focus on direct institutional placements