THIS AGREEMENT is made on this _____ day of _________, 20.
BETWEEN
THE COMPANY: _________________________ (hereinafter referred to as “the Company”), a company incorporated under the Companies Act, 2013, having its registered office at _________________________________, represented by its authorized signatory, of the FIRST PART;
AND
THE SHAREHOLDERS: The persons whose names and details are set out in Schedule A hereto (hereinafter collectively referred to as “the Shareholders” and individually as “a Shareholder”), of the SECOND PART.
The Company and the Shareholders are collectively referred to as “the Parties” and individually as “a Party.”
RECITALS
WHEREAS the Company is engaged in the business of _________________________ and has been successfully operating in the market;
WHEREAS the Company intends to make an Initial Public Offering (IPO) and list its shares on recognised stock exchanges in India;
WHEREAS the Shareholders collectively hold shares in the Company and wish to regulate their rights, obligations, and exit mechanisms during the transition from private to public company;
WHEREAS the Parties wish to enter into this Agreement to govern their relationship during the pre-IPO phase and the subsequent public listing process;
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Parties agree as follows:
ARTICLE 1: DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement, unless the context otherwise requires:
“IPO” means the Initial Public Offering of equity shares of the Company on recognised stock exchanges in India.
“Lock-in Period” refers to the period during which certain shareholders are restricted from selling or transferring their shares, as per SEBI regulations and this Agreement.
“Preference Shares” means the redeemable preference shares currently held by certain shareholders as detailed in Schedule B.
“Equity Shares” refers to the ordinary equity shares of the Company that carry voting rights.
“SEBI” means the Securities and Exchange Board of India.
“Listing Date” means the date on which the Company’s shares are officially listed and commence trading on the stock exchange.
1.2 Interpretation
References to statutory provisions include amendments and re-enactments. Headings are for convenience only and do not affect interpretation. Words denoting singular include plural and vice versa.
ARTICLE 2: IPO PREPARATION AND TIMELINE
2.1 IPO Commitment
The Company agrees to make all reasonable efforts to complete the IPO within _____ months from the date of this Agreement, subject to regulatory approvals and market conditions.
2.2 Cooperation
All Shareholders agree to cooperate fully with the Company, investment bankers, legal advisors, and auditors in the IPO process. This includes providing necessary documentation, consents, and information as required.
2.3 Board Approval
The IPO proposal shall be approved by the Board of Directors and subsequently by the shareholders in accordance with applicable laws and the Company’s Articles of Association.
2.4 Regulatory Compliance
The Company shall ensure compliance with all SEBI regulations, stock exchange requirements, and other applicable laws during the IPO process.
ARTICLE 3: CONVERSION OF PREFERENCE SHARES
3.1 Automatic Conversion
All Preference Shares held by shareholders, as detailed in Schedule B, shall automatically convert into Equity Shares on the earlier of:
(a) Thirty days before the filing of the draft Red Herring Prospectus with SEBI, or
(b) Such other date as may be mutually agreed by the Parties in writing.
3.2 Conversion Ratio
The conversion shall be on a one-to-one basis, meaning each Preference Share shall convert into one Equity Share of the same face value, unless otherwise agreed by all Preference Shareholders.
3.3 Rights Upon Conversion
Upon conversion, the converted Equity Shares shall rank pari passu with existing Equity Shares in all respects, including dividend rights, voting rights, and participation in surplus assets.
3.4 Documentation
The Company shall issue necessary share certificates and update its register of members to reflect the conversion within fifteen days of the conversion date.
ARTICLE 4: LOCK-IN PROVISIONS
4.1 Mandatory Lock-in
Promoters and promoter group shareholders shall be subject to a mandatory lock-in period of three years from the Listing Date or as prescribed by SEBI regulations, whichever is applicable.
4.2 Voluntary Lock-in
Pre-IPO investors who have acquired shares within one year before filing the draft prospectus shall be subject to a lock-in period of one year from the Listing Date or as required by SEBI.
4.3 Lock-in Restrictions
During the lock-in period, affected shareholders shall not:
(a) Sell, transfer, pledge, or encumber their shares;
(b) Enter into any derivative transactions related to such shares;
(c) Create any charge or lien on such shares without prior approval of stock exchanges and SEBI.
4.4 Minimum Promoter Contribution
The promoters shall maintain a minimum shareholding of twenty per cent post-IPO for a period of three years from the Listing Date, as required by SEBI regulations.
4.5 Permitted Transfers
Notwithstanding the lock-in provisions, transfers among promoter group entities or pursuant to SEBI-approved schemes may be permitted subject to regulatory approval.
ARTICLE 5: EXIT STRATEGIES AND MECHANISMS
5.1 Exit Through IPO
Shareholders may offer their shares for sale as part of the Offer for Sale component in the IPO, subject to:
(a) SEBI regulations on selling shareholder participation;
(b) Agreement among Shareholders on proportionate participation;
(c) Overall size constraints of the IPO.
5.2 Post-Lock-in Exit
After expiry of the applicable lock-in period, Shareholders may exit their investment through:
(a) Sale of shares in the open market through stock exchanges;
(b) Block deals or bulk deals as per stock exchange regulations;
(c) Secondary market transactions are subject to insider trading norms.
5.3 Tag-Along Rights
If any Shareholder holding more than five per cent stake receives a bona fide offer from a third party after the lock-in period, other Shareholders shall have the right to participate in such sale on the same terms and conditions.
5.4 Drag-Along Rights
If Shareholders holding seventy-five per cent of the shares agree to a sale after the lock-in period, they may require minority shareholders to participate in such sale on the same terms.
ARTICLE 6: TRANSITION PROVISIONS
6.1 Governance Changes
Upon listing, the Company shall:
(a) Reconstitute the Board to comply with listing regulations, including appointment of independent directors;
(b) Establish mandatory committees such as the Audit Committee, Nomination and Remuneration Committee, and the Stakeholders Relationship Committee;
(c) Implement corporate governance practices as required for listed companies.
6.2 Information Rights
Pre-IPO shareholders acknowledge that post-listing, information sharing shall be governed by SEBI disclosure norms and insider trading regulations rather than private company practices.
6.3 Voting Agreements
Any existing voting agreements among shareholders shall terminate upon listing, and all shareholders shall have the right to vote independently on all matters.
6.4 Reserved Matters
The concept of reserved matters requiring special shareholder approval shall be replaced by statutory requirements under the Companies Act and listing regulations.
ARTICLE 7: REPRESENTATIONS AND WARRANTIES
7.1 Company Representations
The Company represents that:
(a) It is duly incorporated and validly existing;
(b) All financial statements are accurate and prepared in accordance with accounting standards;
(c) There are no material litigation or disputes that would prevent the IPO.
7.2 Shareholder Representations
Each Shareholder represents that:
(a) They have a clear and marketable title to their shares;
(b) Their shares are free from encumbrances;
(c) They have the authority to enter into this Agreement.
ARTICLE 8: GENERAL PROVISIONS
8.1 Confidentiality
All Parties agree to maintain confidentiality regarding IPO plans, financial information, and business strategies until public disclosure.
8.2 Amendment
This Agreement may be amended only by the written consent of Shareholders holding seventy-five per cent of the shares and the Company.
8.3 Governing Law
This Agreement shall be governed by the laws of India, and disputes shall be subject to the exclusive jurisdiction of courts in _________________.
8.4 Severability
If any provision is held invalid, the remaining provisions shall continue in full force and effect.
8.5 Entire Agreement
This Agreement constitutes the entire understanding among the Parties regarding the subject matter and supersedes all prior agreements.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first written above.
FOR THE COMPANY:
Signature: _____________________
Name:
Designation:
Date:
FOR THE SHAREHOLDERS:
As per signatures in Schedule A
SCHEDULE A: SHAREHOLDER DETAILS
[Table containing shareholder names, addresses, shareholding details]
SCHEDULE B: PREFERENCE SHARE DETAILS
[Table containing preference share details, conversion terms]