Equity Participation Agreement Template for India

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Key Requirements PROMPT example:

Equity Participation Agreement

"I need an Equity Participation Agreement for a foreign tech company investing 5 million USD for a 25% stake in our Indian software development company, with specific board representation rights and anti-dilution protection, to be completed by March 2025."

Document background

The Equity Participation Agreement is a crucial document used in Indian corporate transactions when an investor plans to acquire an ownership stake in a company through share subscription or purchase. It's essential for both strategic and financial investments, providing a legally binding framework that protects all parties' interests while ensuring compliance with Indian corporate laws, including the Companies Act, 2013, and SEBI regulations. The agreement typically becomes necessary during funding rounds, strategic partnerships, or when bringing in new shareholders. It covers critical aspects such as investment terms, shareholding rights, management participation, and exit mechanisms, while incorporating necessary provisions to comply with Indian foreign investment regulations when international investors are involved.

Suggested Sections

1. Parties: Identification of all parties to the agreement including the company, existing shareholders, and incoming investor(s)

2. Background: Context of the transaction, including company information and purpose of the equity participation

3. Definitions: Definitions of key terms used throughout the agreement

4. Transaction Structure: Details of the equity participation including number of shares, price per share, and total investment amount

5. Consideration and Payment Terms: Payment schedule, method of payment, and any conditions attached to the payment

6. Conditions Precedent: Conditions that must be satisfied before the investment is made

7. Completion: Steps to be taken at closing, including documentation and filing requirements

8. Representations and Warranties: Statements of fact and assurances from all parties

9. Covenants: Ongoing obligations of the parties post-completion

10. Board Composition and Management: Rights regarding board seats and management participation

11. Reserved Matters: Decisions requiring specific approval of the investor

12. Exit Rights: Provisions regarding future sale of shares and exit mechanisms

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

14. Governing Law and Jurisdiction: Applicable law and courts having jurisdiction

15. Notices: Process for formal communications between parties

16. General Provisions: Standard boilerplate clauses including amendments, waivers, and severability

Optional Sections

1. Tag-Along Rights: Include when minority shareholders need protection in case of majority stake sale

2. Drag-Along Rights: Include when majority shareholders may need to force minority shareholders to join in a sale

3. Anti-Dilution Protection: Include when investors need protection against future down rounds

4. Pre-emptive Rights: Include when existing shareholders should have first right to participate in future funding rounds

5. Foreign Investment Compliance: Include when there are foreign investors involved

6. Non-Compete and Non-Solicit: Include when restrictions on competitive activities are required

7. Information Rights: Include when specific reporting requirements for investors need to be detailed

8. ROFR/ROFO: Include when Right of First Refusal or Right of First Offer on share transfers is needed

Suggested Schedules

1. Schedule 1 - Company Information: Details of the company including corporate information, subsidiaries, and material contracts

2. Schedule 2 - Capitalization Table: Pre and post-investment shareholding pattern

3. Schedule 3 - Conditions Precedent: Detailed list of conditions to be satisfied before completion

4. Schedule 4 - Warranties: Detailed warranties given by the company and existing shareholders

5. Schedule 5 - Reserved Matters: Comprehensive list of decisions requiring investor approval

6. Schedule 6 - Completion Requirements: Detailed list of documents and actions required at completion

7. Schedule 7 - Company Accounts: Latest financial statements and management accounts

8. Appendix A - Share Certificate Form: Format of share certificates to be issued

9. Appendix B - Board Resolution Format: Format of board resolutions required for the transaction

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

alex.den.21@genieai.co

Relevant legal definitions

Clauses

Relevant Industries

Technology

Manufacturing

Financial Services

Healthcare

Real Estate

Infrastructure

E-commerce

Retail

Energy

Telecommunications

Professional Services

Media and Entertainment

Education

Pharmaceuticals

Relevant Teams

Legal

Finance

Corporate Development

Mergers & Acquisitions

Compliance

Board Secretariat

Investment

Corporate Strategy

Risk Management

Corporate Governance

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Legal Officer

Corporate Lawyer

Investment Manager

Company Secretary

Managing Director

Board Director

Private Equity Manager

Venture Capital Manager

M&A Director

Investment Banker

Corporate Finance Manager

Compliance Officer

General Counsel

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Authors

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