Shareholder Management Agreement for India

Shareholder Management Agreement Template for India

A comprehensive legal agreement governed by Indian law that establishes the framework for managing relationships between shareholders in a company. The document outlines shareholders' rights, responsibilities, and obligations, including voting rights, share transfer restrictions, board composition, and dispute resolution mechanisms. It ensures compliance with the Companies Act 2013 and other relevant Indian legislation while providing clear governance structures and protecting both majority and minority shareholder interests. The agreement includes specific provisions for reserved matters, information rights, and exit mechanisms, tailored to meet Indian regulatory requirements and market practices.

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What is a Shareholder Management Agreement?

The Shareholders Management Agreement serves as a crucial governance document in the Indian corporate landscape, establishing the framework for shareholder relationships and company management. This agreement is typically implemented when a company has multiple shareholders with diverse interests, or when new investors join the company structure. It comprehensively addresses aspects such as share transfers, voting rights, board composition, and management decisions, while ensuring compliance with Indian corporate law, particularly the Companies Act 2013, SEBI regulations, and other relevant legislation. The agreement is essential for companies seeking to establish clear governance mechanisms, protect shareholder rights, and prevent potential disputes. It becomes particularly important in scenarios involving venture capital or private equity investments, family businesses with multiple stakeholders, or companies planning significant corporate actions.

What sections should be included in a Shareholder Management Agreement?

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

2. Background: Context of the agreement, including company information and purpose of the arrangement

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

4. Share Capital and Shareholding Pattern: Details of authorized, issued, and paid-up capital, and current shareholding structure

5. Board Composition and Management: Rules for board composition, appointment/removal of directors, and management structure

6. Shareholders' Rights and Obligations: Core rights and obligations of shareholders, including voting rights and dividend rights

7. Transfer of Shares: Procedures and restrictions for share transfers, including right of first refusal and tag-along rights

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

9. General Meetings: Procedures for conducting shareholder meetings, voting, and quorum requirements

10. Information Rights: Shareholders' rights to company information and financial statements

11. Confidentiality: Obligations regarding confidential information and trade secrets

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

13. Term and Termination: Duration of agreement and circumstances for termination

14. Dispute Resolution: Mechanism for resolving disputes, including jurisdiction and arbitration

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

What sections are optional to include in a Shareholder Management Agreement?

1. Drag Along Rights: Include when majority shareholders may need to force minority shareholders to join in the sale of the company

2. Anti-Dilution Protection: Include for investors requiring protection against future down rounds

3. IPO Rights: Include when there's potential for future public listing

4. Strategic Decisions: Include when specific business decisions need special treatment or process

5. Exit Rights: Include specific mechanisms for shareholder exit beyond standard transfer provisions

6. Put and Call Options: Include when shareholders want specific rights to buy or sell shares at predetermined terms

7. Deadlock Resolution: Include detailed mechanisms for resolving board or shareholder deadlocks

8. Director Indemnification: Include when enhanced protection for directors is required

9. Foreign Investment Provisions: Include when foreign shareholders are involved, addressing FEMA compliance

What schedules should be included in a Shareholder Management Agreement?

1. Schedule 1 - Details of Shareholders: Complete details of all shareholders including shareholding percentages and contact information

2. Schedule 2 - Share Capital Structure: Detailed breakdown of company's share capital structure and classes of shares

3. Schedule 3 - Reserved Matters List: Comprehensive list of matters requiring special approval

4. Schedule 4 - Board Composition: Details of current board composition and nomination rights

5. Schedule 5 - Business Plan: Initial business plan and key milestones

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

7. Schedule 7 - Tag Along Calculation: Formula and methodology for calculating tag along rights

8. Schedule 8 - Valuation Principles: Agreed principles for share valuation in various circumstances

9. Appendix A - Company Information: Key corporate information including registration details and licenses

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

Jurisdiction

India

Publisher

Genie AI

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Technology

Manufacturing

Financial Services

Healthcare

Real Estate

Retail

E-commerce

Telecommunications

Professional Services

Energy

Infrastructure

Media & Entertainment

Education

Agriculture

Automotive

Relevant Teams

Legal

Corporate Secretarial

Compliance

Finance

Corporate Governance

Board of Directors

Executive Management

Investor Relations

Risk Management

Corporate Affairs

Relevant Roles

Chief Executive Officer

Managing Director

Company Secretary

Legal Counsel

Corporate Lawyer

Chief Financial Officer

Board Director

Compliance Officer

Investment Manager

Private Equity Manager

Venture Capital Manager

Corporate Governance Officer

Risk Manager

Strategy Director

Shareholder Relations Manager

Industries
Companies Act, 2013: Primary legislation governing company formation, management, shareholding, corporate governance, and shareholder rights in India. Particularly relevant sections include Section 236 (minority shareholder rights), Section 47 (voting rights), and Section 62 (share transfer provisions).
Securities Contracts (Regulation) Act, 1956: Regulates securities trading and stock exchanges. Relevant for provisions related to transfer of shares, especially in listed companies, and compliance requirements for share transactions.
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011: Governs substantial acquisition of shares, voting rights, and control. Important for provisions related to ownership thresholds and mandatory open offer requirements.
Indian Contract Act, 1872: Provides the basic framework for contract formation and enforcement. Relevant for general contractual provisions, breach remedies, and enforcement mechanisms.
Competition Act, 2002: Regulates anti-competitive practices. Relevant for provisions related to share transfer restrictions and business operation limitations that might affect market competition.
Income Tax Act, 1961: Governs taxation aspects of share transfers, dividend distributions, and capital gains. Important for tax-related provisions in share transfer and profit distribution clauses.
Foreign Exchange Management Act (FEMA), 1999: Relevant if any foreign shareholders are involved. Governs foreign investment in Indian companies and cross-border share transactions.
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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