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Startup Equity Contract

Startup Equity Contract Template for India

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Key Requirements PROMPT example:

Startup Equity Contract

"I need a Startup Equity Contract for an angel investment round where three investors are collectively investing ₹2 crore for 15% equity in my SaaS startup, with standard tag-along rights and a single board seat."

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Document background
The Startup Equity Contract serves as a fundamental legal instrument in India's vibrant startup ecosystem, designed to facilitate and formalize equity investments in emerging companies. This document is essential when startups seek capital investment in exchange for equity shares, whether from angel investors, venture capital firms, or other institutional investors. It comprehensively addresses key aspects such as share subscription, valuation, investor rights, and protective provisions while ensuring compliance with Indian regulatory requirements, including the Companies Act, 2013, SEBI regulations, and relevant startup policies. The contract typically becomes necessary during funding rounds and must be carefully structured to balance investor protection with operational flexibility for the startup's growth.
Suggested Sections

1. Parties: Identification of the company, existing shareholders, and new investors

2. Background: Context of the investment, company status, and purpose of the agreement

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

4. Share Subscription Details: Number, class, and price of shares being issued

5. Consideration: Details of payment and valuation

6. Conditions Precedent: Conditions that must be met before share issuance

7. Representations and Warranties: Company's and founders' representations regarding business, assets, and liabilities

8. Investor Rights: Voting rights, board representation, and information rights

9. Transfer Restrictions: Limitations on share transfers and right of first refusal provisions

10. Tag-Along and Drag-Along Rights: Co-sale rights and majority sale provisions

11. Anti-Dilution Protection: Provisions protecting investor ownership percentage

12. Confidentiality: Non-disclosure obligations regarding company information

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

14. Dispute Resolution: Process for resolving disagreements

15. Governing Law: Applicable law and jurisdiction

Optional Sections

1. Founder Vesting: Include when founders' shares are subject to vesting schedule

2. Liquidation Preference: Include for preferred share investments specifying priority in liquidation events

3. Pre-emptive Rights: Include when investors should have rights to participate in future funding rounds

4. Strategic Rights: Include for strategic investors requiring specific business collaboration terms

5. Employee Stock Options: Include if ESOP pool is being created or modified as part of the investment

6. Non-Compete and Non-Solicit: Include when restrictions on founder competition are required

7. Foreign Investment Compliance: Include when foreign investors are involved

8. Intellectual Property Assignment: Include when IP transfer or assignment is part of the investment terms

Suggested Schedules

1. Schedule 1: Cap Table: Pre and post-investment shareholding pattern

2. Schedule 2: Company Information: Detailed company information including registration details, directors, and key contracts

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

4. Schedule 4: Warranties: Comprehensive list of company and founder warranties

5. Schedule 5: Reserved Matters: List of decisions requiring investor approval

6. Schedule 6: Registration Rights: Details of investors' rights in case of IPO

7. Appendix A: Share Certificate: Format of share certificate to be issued

8. Appendix B: Board Resolution: Format of board resolution approving share issuance

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
Articles of Association
Board
Business Day
Business Plan
Closing
Closing Date
Companies Act
Competitor
Confidential Information
Drag Along Rights
Encumbrance
Equity Shares
ESOP
Event of Default
Fair Market Value
Financial Year
Fully Diluted Share Capital
Governmental Authority
Initial Public Offering (IPO)
Intellectual Property Rights
Investment Amount
Investor
Key Employees
Liquidation Event
Liquidation Preference
Material Adverse Effect
Memorandum of Association
New Securities
Ordinary Course of Business
Pre-emptive Rights
Preferred Shares
Pro Rata Share
Promoters
Qualified IPO
Related Party
Reserved Matters
SEBI
Securities
Share Capital
Shareholders Agreement
Subscription Shares
Subsidiary
Tag Along Rights
Transfer
Valuation
Warranties
Clauses
Share Subscription
Share Price and Consideration
Conditions Precedent
Closing Conditions
Representations and Warranties
Board Composition
Reserved Matters
Information Rights
Pre-emptive Rights
Transfer Restrictions
Tag-Along Rights
Drag-Along Rights
Anti-Dilution Protection
Liquidation Preference
Exit Rights
Non-Compete
Non-Solicitation
Confidentiality
Intellectual Property Rights
Founder Obligations
ESOP Provisions
Further Funding
Events of Default
Indemnification
Dispute Resolution
Governing Law
Force Majeure
Assignment
Notices
Amendment
Termination
Severability
Entire Agreement
Costs and Expenses
Relevant Industries

Technology

E-commerce

Financial Technology

Healthcare Technology

Education Technology

Software as a Service

Consumer Internet

Deep Technology

Artificial Intelligence

Biotechnology

Clean Technology

Digital Media

Manufacturing

Retail Technology

Relevant Teams

Legal

Finance

Corporate Affairs

Compliance

Executive Leadership

Investment

Due Diligence

Board of Directors

Corporate Governance

Company Secretarial

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Company Secretary

Legal Counsel

Investment Manager

Venture Capital Partner

Angel Investor

Board Member

Corporate Lawyer

Startup Founder

Chief Legal Officer

Investment Director

Managing Partner

Due Diligence Officer

Compliance Officer

Industries
Companies Act, 2013: Primary legislation governing company formation, share capital, shareholder rights, and corporate governance requirements in India
Securities and Exchange Board of India Act, 1992: Regulates securities market and protects investor interests, including regulations for private placement and share issuance
Foreign Exchange Management Act (FEMA), 1999: Governs foreign investment in Indian companies, relevant if foreign investors are involved in the startup
Income Tax Act, 1961: Covers taxation aspects of equity transactions, including tax implications for share transfers and capital gains
Indian Contract Act, 1872: Fundamental law governing contracts in India, including basic principles of contract formation and enforcement
Startup India Initiative Guidelines: Government policies and regulations specific to startups, including tax benefits and compliance relaxations
Information Technology Act, 2000: Relevant for technology startups, governing electronic records and digital signatures in documentation
Indian Stamp Act, 1899: Governs stamp duty requirements for share transfer and issuance documents
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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