Shareholders Agreement (Early-Stage)

SHAREHOLDERS AGREEMENT

This Shareholders Agreement is made on [DATE] between:

1. [COMPANY NAME] Private Limited, CIN [CIN], having its registered office at [ADDRESS] ("Company");
2. The persons listed in Part A of Schedule 1 ("Founders"); and
3. The persons listed in Part B of Schedule 1 ("Investors").
(The Founders and Investors together are "Shareholders".)

1. DEFINITIONS
In this Agreement:
"Board" means the board of directors of the Company.
"Investor Majority" means Investors holding more than [50]% of the shares held by all Investors.
"Shares" means equity shares of the Company.
"Transfer" includes sale, gift, pledge or other disposal of Shares.

2. SHAREHOLDING
The shareholding of the Company on the date of this Agreement is set out in Schedule 1.

3. BOARD
3.1 The Board will have up to [NUMBER] directors.
3.2 The Founders together may appoint [NUMBER] directors, so long as they hold at least [PERCENTAGE]% of the Shares.
3.3 The Investor Majority may appoint one director, so long as the Investors together hold at least [PERCENTAGE]% of the Shares. Until then, or if they choose not to appoint, the Investor Majority may appoint one non-voting observer.
3.4 Board meetings will be held at least once every quarter. The quorum is [NUMBER] directors, including the Investor director if appointed, except at a meeting adjourned for lack of quorum.

4. RESERVED MATTERS
The Company will not do any of the matters listed in Schedule 2 without the prior written consent of the Investor Majority, which will not be unreasonably withheld or delayed. If the Investor Majority does not respond within [NUMBER] business days of a written request, consent is deemed given.

5. FURTHER ISSUE OF SHARES
5.1 If the Company proposes to issue new Shares or securities convertible into Shares, it will first offer them to all Shareholders in proportion to their shareholding, in accordance with the Companies Act, 2013.
5.2 Clause 5.1 does not apply to options granted under an employee stock option plan approved by the Board and Shareholders, up to [PERCENTAGE]% of the fully diluted share capital.

6. TRANSFER OF SHARES
6.1 Lock-in: No Founder will Transfer Shares for [NUMBER] months from the date of this Agreement without the consent of the Investor Majority, except a Transfer to a family trust controlled by that Founder or under the Founder vesting terms in Schedule 3.
6.2 Right of first refusal: A Shareholder wishing to Transfer Shares to a third party must first offer them to the other Shareholders, in proportion to their holdings, at the same price and on the same terms, by written notice. The other Shareholders will have [NUMBER] days to accept. Shares not taken up may be sold to the third party within [NUMBER] days at a price not lower and on terms not more favourable than those offered.
6.3 Tag-along: If one or more Founders propose to Transfer Shares resulting in a change of control of the Company, each Investor may require the buyer to purchase the same proportion of that Investor's Shares at the same price and on the same terms.
6.4 Drag-along: If Shareholders holding at least [PERCENTAGE]% of the Shares, including the Investor Majority, accept a genuine offer from an unrelated buyer for all Shares, at a price per Share not lower than [AMOUNT / FAIR MARKET VALUE DETERMINED BY AN INDEPENDENT VALUER], all other Shareholders will sell their Shares to that buyer on the same terms. No dragged Shareholder will be required to give any warranty other than as to title to its Shares and its capacity to sell.
6.5 The Board will not register any Transfer made in breach of this clause.

7. FOUNDER COMMITMENTS
7.1 Each Founder will work full-time for the Company and will not engage in any competing business while a Founder or employee of the Company.
7.2 Each Founder has assigned, or will assign within [NUMBER] days, all intellectual property relating to the business of the Company to the Company by a written assignment.
7.3 Founder Shares are subject to the vesting terms in Schedule 3.

8. INFORMATION RIGHTS
So long as an Investor holds Shares, the Company will provide that Investor with:
(a) quarterly management accounts within [NUMBER] days of each quarter end; and
(b) audited annual accounts within [NUMBER] days of each financial year end.

9. COMPLIANCE
The Company will comply with applicable law, including the Companies Act, 2013, tax laws and, where any Shareholder is a non-resident, the Foreign Exchange Management Act, 1999 and the rules made under it.

10. ARTICLES OF ASSOCIATION
The Shareholders will vote to adopt Articles of Association reflecting this Agreement within [NUMBER] days of its date. If there is a conflict between this Agreement and the Articles, the Shareholders will vote to amend the Articles to remove the conflict.

11. CONFIDENTIALITY
Each Shareholder will keep information about the Company confidential, except disclosures to its advisers, genuine prospective investors or buyers under confidentiality obligations, or as required by law.

12. TERMINATION
This Agreement terminates on the listing of the Company's Shares on a recognised stock exchange, or by written agreement of all Shareholders. It ceases to apply to a Shareholder who no longer holds any Shares, except clause 11.

13. DISPUTES
Disputes will be referred to a sole arbitrator appointed by mutual agreement under the Arbitration and Conciliation Act, 1996, with the seat at [CITY].

14. GENERAL
This Agreement is governed by the laws of India. Amendments require the written consent of the Company, Founders holding a majority of Founder Shares and the Investor Majority. New shareholders must sign a deed of adherence before Shares are issued or transferred to them.

Signed by the parties:

For [COMPANY NAME] Private Limited: _______________ [NAME], Director
Founders: _______________ [FOUNDER 1]   _______________ [FOUNDER 2]
Investors: _______________ [INVESTOR 1]   _______________ [INVESTOR 2]

SCHEDULE 1: SHAREHOLDING
Part A: Founders
Name | Number of Shares | % of share capital
[NAME] | [NUMBER] | [%]

Part B: Investors
Name | Number of Shares | % of share capital
[NAME] | [NUMBER] | [%]

SCHEDULE 2: RESERVED MATTERS
1. Amending the Memorandum or Articles of Association.
2. Changing the authorised or issued share capital, other than under clause 5.2.
3. Creating a class of shares with rights superior to the Investors' Shares.
4. Merger, demerger, winding up or sale of all or substantially all assets.
5. Borrowing above ₹[AMOUNT] in aggregate.
6. Related party transactions above ₹[AMOUNT], other than founder salaries approved by the Board.
7. Changing the principal business of the Company.

SCHEDULE 3: FOUNDER VESTING
[Set out the vesting period, cliff, good and bad leaver definitions and transfer price for unvested Shares, consistent with any co-founder agreement.]

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