Investor Agreement in India: All You Need to Know
Investing in India can be a lucrative opportunity for any investor. However, it is important to make sure that the investment is protected and that the investor`s interests are safeguarded. An investor agreement in India is a legal document that sets out the terms and conditions for the investment. In this article, we will discuss all you need to know about the investor agreement in India.
What is an Investor Agreement?
An investor agreement, also known as a shareholders` agreement, is a legal agreement between the investor and the company in which the investor is investing. The agreement lays down the rights, obligations, and responsibilities of the investor and the company. It is a private agreement that is not filed with any regulatory authority.
Investor Agreement in India
In India, an investor agreement is governed by the Indian Contract Act, 1872, and the Companies Act, 2013. According to the Companies Act, 2013, the investor agreement must be in writing and signed by all the parties involved.
Key Provisions of an Investor Agreement
The investor agreement in India typically contains clauses that cover various aspects of the investment. Some of the key provisions of an investor agreement are:
1. Shareholding pattern: The agreement outlines the percentage of shares that the investor will hold in the company.
2. Board representation: The agreement specifies whether the investor will have the right to nominate a member to the board of directors.
3. Management control: The agreement may give the investor certain rights over the management of the company.
4. Transfer of shares: The agreement outlines the conditions under which the investor can transfer their shares to another party and the right of first refusal of the other shareholders.
5. Exit route: The agreement specifies the exit options available to the investor, such as selling their shares to the company or other shareholders.
6. Non-compete clause: The agreement may contain a clause that restricts the investor from investing in or starting a similar business.
7. Confidentiality clause: The agreement may have a confidentiality clause that prohibits the investor from disclosing the company`s confidential information.
An investor agreement is a crucial document that protects the investor`s interests and lays down the terms and conditions of the investment. It is important to have a well-drafted agreement that covers all aspects of the investment. In India, the Companies Act, 2013, mandates that the investor agreement must be in writing and signed by all the parties involved. As an investor, it is advisable to consult a legal expert to draft a comprehensive and enforceable investor agreement.