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Shareholder Operating Agreement

Shareholder Operating Agreement Template for India

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Key Requirements PROMPT example:

Shareholder Operating Agreement

"I need a Shareholders Operating Agreement for a technology startup in Bangalore with three founding shareholders and one venture capital investor, including specific provisions for future funding rounds and an IPO planned for 2025."

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Document background
The Shareholders Operating Agreement serves as a fundamental document in Indian corporate governance, essential for companies with multiple shareholders seeking to establish clear operational and management frameworks. This agreement becomes particularly crucial when companies transition from founder-only ownership to multiple shareholders or when bringing in new investors. Under Indian law, the Shareholders Operating Agreement must align with the Companies Act, 2013, and complement the company's Articles of Association. It typically addresses key aspects such as shareholding rights, transfer restrictions, management control, profit distribution, and exit mechanisms, while ensuring compliance with Indian regulatory requirements. The agreement is vital for preventing and resolving potential conflicts between shareholders and providing clarity on company governance.
Suggested Sections

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

2. Background: Contains recitals explaining the context and purpose of the agreement

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

4. Share Capital and Shareholding Structure: Details the company's share capital, classes of shares, and current shareholding pattern

5. Management and Corporate Governance: Establishes the board structure, appointment rights, and decision-making processes

6. Shareholders' Rights and Obligations: Outlines fundamental rights including voting, dividends, and information rights

7. Transfer of Shares: Details restrictions and procedures for share transfers, including right of first refusal

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

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

10. Confidentiality: Obligations regarding company and shareholder information

11. Dispute Resolution: Mechanisms for resolving disputes between shareholders

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

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

Optional Sections

1. Tag-Along and Drag-Along Rights: Include when shareholders want exit rights protecting minority interests or enabling majority exits

2. Anti-Dilution Protection: Important for companies planning future funding rounds

3. Put and Call Options: Include when shareholders want specific exit mechanisms

4. Non-Compete and Non-Solicit: Important for closely held companies or when shareholders are actively involved in business

5. Deadlock Resolution: Critical for 50-50 joint ventures or companies with equal shareholding

6. Strategic Rights: For companies with strategic investors requiring specific rights

7. Foreign Investment Compliance: Required when foreign shareholders are involved

8. IPO Rights: Include if company plans to go public in the future

Suggested Schedules

1. Schedule 1 - Shareholding Pattern: Detailed breakdown of current shareholding including share numbers and percentages

2. Schedule 2 - Reserved Matters List: Comprehensive list of decisions requiring special approval

3. Schedule 3 - Board Composition: Details of current board structure and nomination rights

4. Schedule 4 - Business Plan: Initial business plan and key milestones

5. Schedule 5 - Share Valuation Methodology: Agreed method for valuing shares for transfers or exits

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

7. Appendix B - Key Management Positions: List of key positions and appointment rights

8. Appendix C - Company Policies: Key corporate policies referenced in the agreement

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
Affiliate
Annual General Meeting
Articles of Association
Board of Directors
Business Day
Business Plan
Call Option
Company
Competitor
Confidential Information
Control
Deed of Adherence
Directors
Drag-Along Right
Encumbrance
Event of Default
Exercise Notice
Exit Event
Fair Market Value
Financial Year
First Offer Notice
Fully Diluted Share Capital
General Meeting
Group Company
Independent Director
Initial Public Offering (IPO)
Intellectual Property Rights
Key Management Personnel
Material Adverse Effect
Memorandum of Association
Nominee Director
Ordinary Course of Business
Party/Parties
Pre-emptive Right
Put Option
Qualified IPO
Related Party
Reserved Matters
ROFR Notice
Share Capital
Shareholders
Shareholding Pattern
Subsidiary
Tag-Along Right
Transfer
Transferee
Transferor
Voting Rights
Clauses
Interpretation
Definitions
Share Capital
Share Transfer Restrictions
Right of First Refusal
Tag-Along Rights
Drag-Along Rights
Pre-emptive Rights
Board Composition
Board Meetings
Shareholder Meetings
Voting Rights
Reserved Matters
Management Rights
Information Rights
Dividend Policy
Exit Rights
Put Option
Call Option
Anti-Dilution
Non-Compete
Non-Solicitation
Confidentiality
Representations and Warranties
Indemnification
Dispute Resolution
Deadlock Resolution
Term and Termination
Events of Default
Consequences of Termination
Assignment
Notices
Governing Law
Jurisdiction
Force Majeure
Severability
Entire Agreement
Amendment
Waiver
Costs
Further Assurance
Relevant Industries

Technology

Manufacturing

Financial Services

Healthcare

Real Estate

Retail

E-commerce

Professional Services

Media and Entertainment

Education

Infrastructure

Pharmaceuticals

Telecommunications

Agricultural Business

Energy and Utilities

Relevant Teams

Legal

Corporate Secretarial

Compliance

Finance

Corporate Development

Investment Relations

Risk Management

Board Secretariat

Corporate Governance

Executive Leadership

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Company Secretary

Legal Counsel

Corporate Lawyer

Investment Manager

Board Director

Managing Director

Compliance Officer

Corporate Governance Officer

Shareholder Relations Manager

Investment Director

Private Equity Manager

Venture Capital Partner

Business Development Director

Risk Management Officer

Industries
Companies Act, 2013: Primary legislation governing company formation, management, and operations in India, including provisions for shareholder rights, corporate governance, and compliance requirements
Indian Contract Act, 1872: Fundamental law governing contract formation and enforcement in India, ensuring the agreement meets basic requirements of a valid contract
Securities and Exchange Board of India Act, 1992: Regulates securities market and protects investor interests, particularly relevant for listed companies or those planning to go public
Foreign Exchange Management Act (FEMA), 1999: Governs foreign investment in Indian companies and cross-border transactions, important if foreign shareholders are involved
Income Tax Act, 1961: Relevant for tax implications of share transfers, dividend distributions, and other financial transactions between shareholders
Information Technology Act, 2000: Applicable for electronic record keeping and digital signatures if the agreement is executed electronically
Stamp Act (Various State Stamp Acts): Determines the stamp duty payable on the agreement, which varies by state in India
Competition Act, 2002: Relevant for provisions regarding acquisition of shares and control, particularly in larger companies or specific sectors
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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