Drafting Shareholder Agreement & Share Subscription Agreement
A Shareholder Agreement (SHA) and a Share Subscription Agreement (SSA) are critical legal documents that define the rights, obligations, and ownership structure among shareholders.
These agreements help prevent disputes, provide clarity in decision-making, and safeguard investors' interests throughout the business relationship.
What is a Shareholder Agreement (SHA)?
A Shareholder Agreement is a legally binding contract between a company and its shareholders, outlining their rights, obligations, and decision-making processes. It covers aspects like voting rights, transfer restrictions, dispute resolution, exit mechanisms, and shareholder roles.
Key Elements of a Shareholder Agreement:
- Shareholder Rights & Obligations – Defines ownership rights, responsibilities, and voting power.
- Transfer & Exit Clauses – Specifies restrictions on share transfers, pre-emptive rights, tag-along & drag-along rights.
- Management & Decision-Making – Defines how key business decisions will be made.
- Dispute Resolution – Lays down mechanisms for resolving conflicts among shareholders.
- Dividend Distribution Policy – Outlines the profit-sharing model among shareholders.
What is a Share Subscription Agreement (SSA)?
A Share Subscription Agreement is an agreement between a company and an investor, governing the issuance and subscription of shares. It sets forth terms under which an investor agrees to subscribe to a specific number of shares in exchange for an agreed investment amount.
Key Elements of a Share Subscription Agreement:
- Subscription Terms – Specifies the number of shares being subscribed and the price.
- Payment Terms – Defines how and when the investment will be paid.
- Warranties & Representations – Ensures compliance with legal and financial regulations.
- Investor Rights & Protections – Includes anti-dilution provisions, information rights, and exit mechanisms.
- Compliance & Regulatory Approvals – Ensures adherence to the Companies Act, FEMA, and SEBI regulations.
Benefits of Well-Drafted SHA & SSA
Dispute Prevention
Clear terms and conditions establish a framework for handling future conflicts, significantly reducing the likelihood of disputes.
Investor Confidence
Professional agreements inspire trust and confidence among investors, making fundraising more effective.
Minority Protection
Specific clauses safeguard minority shareholders' interests against potential majority oppression.
Business Continuity
Provisions for share transfers, exits, and succession planning ensure smooth business operations even when shareholders change.
Clarity in Decision-Making
Clearly defined governance structures and voting rights streamline corporate decision-making processes.
Legal Compliance
Professionally drafted agreements ensure compliance with all relevant laws and regulations, minimizing legal risks.
Why Choose Us for Drafting SHA & SSA
- Expert Legal Drafting – Our team ensures legally sound agreements customized for your business.
- Compliance with Regulations – We ensure your agreements meet Companies Act, FEMA, SEBI, and other regulatory requirements.
- Tailor-Made Agreements – SHA & SSA tailored to your business model and investor relations.
- Risk Mitigation & Investor Protection – Structured agreements to minimize future disputes.
Frequently Asked Questions
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