🔒 Legal Essentials: Shareholder Agreements in Unlisted Equity

Summary: For unlisted investments, a robust shareholder agreement (SHA) protects minority rights, outlines exit mechanisms, and enforces governance standards—key for institutional and retail investors alike.

1. Key SHA Clauses

• Tag-Along & Drag-Along: Ensures minority investors can exit alongside majority sales or are bound by a sale decision.¹⁵
• Voting Rights & Quorum: Defines approvals needed for major actions (M&A, capital raises).
• Board Composition: Seats reserved for investor nominees to monitor performance.

2. Exit & Liquidity Provisions

Clauses for IPO lock-ins, put/call options, and sale to strategic investors clarify your path to liquidity.¹⁶

3. Anti-Dilution Protection

Prevents value erosion by adjusting conversion ratios or issuing bonus options on down-round financings.¹⁷

4. Dispute Resolution & Governing Law

Mandatory arbitration in specified jurisdictions (e.g., Mumbai), ensuring enforceability and streamlined recourse.¹⁸

5. Working with Legal Experts

Use InvestoEdge’s panel of top corporate lawyers to draft iron-clad SHAs tailored to your investment size and risk appetite.

References

1. India Briefing – Tag & Drag Rights
2. Nishith Desai Associates – SHA Manual
3. Mondaq – Anti-Dilution Protection
4. ICC – Arbitration Clauses