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Founder Shareholder Agreement

Founder Shareholder Agreement Template for India

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Key Requirements PROMPT example:

Founder Shareholder Agreement

"I need a Founder Shareholder Agreement for my technology startup in Bangalore, to be effective from January 2025, with three co-founders having unequal shareholding (51%, 29%, 20%) and specific provisions for technology IP protection and future funding rounds."

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Document background
The Founder Shareholder Agreement is a critical document used during company formation or early stages of a business in India, when multiple founders come together to establish their rights and responsibilities. This agreement becomes particularly important as it sets the foundation for corporate governance and helps prevent future disputes among founders. It addresses key aspects such as equity distribution, decision-making powers, exit mechanisms, and non-compete obligations, all while ensuring compliance with Indian corporate law. The document is essential for startups and new ventures across various sectors, providing clarity on crucial matters like board composition, reserved matters, and share transfer restrictions. The agreement must comply with the Indian Companies Act, 2013, SEBI regulations, and other relevant Indian laws, making it a fundamental instrument in establishing and maintaining founder relationships in Indian companies.
Suggested Sections

1. Parties: Identification of all founding shareholders and the company as parties to the agreement

2. Background: Context of the agreement, including company formation details and purpose

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

4. Shareholding Structure: Details of initial shareholding percentages, share classes, and capital structure

5. Board Composition and Governance: Rules regarding board size, appointment of directors, and board proceedings

6. Shareholders' Rights and Obligations: Key rights and duties of founding shareholders, including voting rights and capital contribution obligations

7. Transfer Restrictions: Limitations on share transfers, including right of first refusal and lock-in periods

8. Reserved Matters: List of decisions requiring special majority or unanimous consent

9. Tag Along and Drag Along Rights: Provisions protecting minority shareholders and enabling majority exits

10. Exit Provisions: Mechanisms for shareholder exits, including IPO, strategic sale, or buyback

11. Confidentiality: Obligations regarding confidential information and trade secrets

12. Non-Compete and Non-Solicit: Restrictions on competitive activities and employee solicitation

13. Dispute Resolution: Procedures for resolving disputes between shareholders

14. General Provisions: Standard clauses including notices, governing law, and amendments

Optional Sections

1. Anti-Dilution Protection: Protection against equity dilution, typically included when future funding rounds are anticipated

2. Intellectual Property Rights: Specific provisions for IP ownership and transfer, important for technology companies

3. Founder Vesting: Vesting schedule for founder shares, typically used in startups to ensure long-term commitment

4. Emergency Funding Provisions: Procedures for emergency capital calls or bridge funding

5. Digital Governance: Provisions for virtual meetings and electronic communications, important for modern companies

6. Related Party Transactions: Rules for handling transactions between the company and related parties

7. Foreign Investment Compliance: Required when foreign investment is involved or anticipated

Suggested Schedules

1. Schedule 1 - Details of Shareholders: Complete details of founding shareholders including shareholding percentages

2. Schedule 2 - Business Plan: Initial business plan and key milestones

3. Schedule 3 - Share Capital Structure: Detailed breakdown of share classes and rights

4. Schedule 4 - Reserved Matters List: Comprehensive list of matters requiring special approval

5. Schedule 5 - Tag and Drag Along Procedures: Detailed procedures for implementing tag and drag along rights

6. Schedule 6 - Deed of Adherence: Template for new shareholders to join the agreement

7. Appendix A - Board Resolution Templates: Standard templates for common board resolutions

8. Appendix B - Valuation Methodology: Agreed methods for company valuation in various scenarios

Authors

Alex Denne

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

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Articles of Association
Board
Business
Business Day
Business Plan
Company
Confidential Information
Deed of Adherence
Directors
Encumbrance
Event of Default
Fair Market Value
Financial Year
Founder(s)
Group Company
Independent Director
Initial Business Plan
Intellectual Property Rights
Lock-in Period
Material Adverse Effect
Memorandum of Association
Notice
Ordinary Course of Business
Parties
Related Party
Reserved Matters
Right of First Refusal
Share Capital
Shareholders
Shares
Tag Along Right
Drag Along Right
Transfer
Valuation
Voting Rights
Board Resolution
Competitor
Control
Deemed Transfer
Emergency Funding
Exit Event
Fully Diluted Share Capital
Governing Law
Initial Public Offering
Managing Director
Non-Compete Period
Permitted Transfers
Quorum
Special Resolution
Strategic Sale
Subsidiary
Territory
Clauses
Interpretation
Definitions
Share Capital and Structure
Board Composition
Board Meetings
Shareholder Meetings
Voting Rights
Reserved Matters
Pre-emptive Rights
Transfer Restrictions
Right of First Refusal
Tag Along Rights
Drag Along Rights
Non-Compete
Non-Solicitation
Confidentiality
Intellectual Property
Founder Commitments
Management Rights
Information Rights
Dividend Policy
Exit Rights
Deadlock Resolution
Event of Default
Termination
Dispute Resolution
Governing Law
Force Majeure
Notices
Assignment
Severability
Entire Agreement
Amendment
Waiver
Further Assurance
Costs
Indemnification
Representations and Warranties
Anti-Dilution
Share Valuation
Emergency Funding
Related Party Transactions
Relevant Industries

Technology and Software

E-commerce

Manufacturing

Professional Services

Healthcare

Financial Services

Education Technology

Retail

Consulting

Media and Entertainment

Real Estate

Biotechnology

Clean Energy

Agriculture Technology

Relevant Teams

Legal

Corporate Secretarial

Compliance

Corporate Governance

Board of Directors

Executive Leadership

Finance

Risk Management

Relevant Roles

Chief Executive Officer

Company Secretary

Chief Legal Officer

Corporate Lawyer

Managing Director

Board Director

Founder

Co-founder

Chief Financial Officer

Legal Counsel

Corporate Governance Officer

Compliance Officer

Investment Manager

Business Development Director

Startup Advisor

Industries
Companies Act, 2013: Primary legislation governing company formation, management, shareholding patterns, director duties, corporate governance, and shareholder rights in India
Indian Contract Act, 1872: Fundamental law governing contracts in India, essential for ensuring the agreement's validity, enforceability, and remedies for breach
Securities Contracts (Regulation) Act, 1956: Regulates securities trading and transfer, relevant for share transfer provisions and restrictions
SEBI Guidelines and Regulations: Regulatory framework for securities market, particularly important for share issuance and transfer provisions
Foreign Exchange Management Act, 1999: Relevant if any foreign investment elements or cross-border transactions are involved in the shareholding structure
Information Technology Act, 2000: Applicable for digital governance provisions, electronic record keeping, and digital signatures if used in the agreement
Income Tax Act, 1961: Relevant for share transfer pricing, valuation considerations, and tax implications of various corporate actions
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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