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Call Option Shareholders Agreement Template for India

A Call Option Shareholders Agreement under Indian law is a legally binding document that grants one party (the option holder) the right, but not the obligation, to purchase a specified number of shares from another party (the option grantor) at a predetermined price or based on a specified pricing mechanism, within a defined time period. The agreement is governed by Indian corporate and securities laws, including the Companies Act 2013 and relevant SEBI regulations. It details the terms and conditions of the option, exercise mechanics, representations and warranties, and completion obligations, while ensuring compliance with Indian regulatory requirements for share transfers and foreign investment regulations where applicable.

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What is a Call Option Shareholders Agreement?

The Call Option Shareholders Agreement is a strategic document commonly used in Indian corporate transactions to provide investors, strategic partners, or other stakeholders with the right to increase their shareholding in a company at a future date. This agreement type is particularly valuable in staged investments, strategic partnerships, or as part of broader M&A strategies. The document must comply with Indian corporate law, particularly the Companies Act 2013, SEBI regulations, and where applicable, foreign investment rules under FEMA. It typically includes detailed provisions on option mechanics, pricing, conditions precedent, and regulatory compliance requirements. The agreement is essential in scenarios where parties want to secure future ownership rights while deferring the actual purchase, making it a crucial tool in corporate structuring and investment planning under Indian law.

What sections should be included in a Call Option Shareholders Agreement?

1. Parties: Identification of all parties to the agreement including the option holder(s) and the grantor(s)

2. Background: Context of the agreement, including company details and reason for granting the call option

3. Definitions and Interpretation: Definitions of key terms and interpretation rules for the agreement

4. Grant of Call Option: Core provision establishing the call option, including the number of shares subject to the option

5. Option Exercise Price: Specification of the price or price mechanism for exercising the option

6. Exercise Period and Mechanics: Timeframe and detailed procedure for exercising the option

7. Completion of Transfer: Process and obligations for completing the share transfer upon option exercise

8. Representations and Warranties: Key statements of fact and assurances from all parties

9. Share Rights and Restrictions: Rights attached to the option shares and any restrictions on transfer

10. Covenants: Ongoing obligations of the parties during the option period

11. Events of Default: Circumstances constituting default and consequences

12. Termination: Circumstances and process for terminating the agreement

13. Notices: Process and requirements for formal communications between parties

14. Governing Law and Jurisdiction: Specification of Indian law as governing law and jurisdiction for disputes

15. General Provisions: Standard boilerplate clauses including amendments, waiver, and severability

What sections are optional to include in a Call Option Shareholders Agreement?

1. Tag-Along Rights: Optional section when other shareholders are granted the right to join in the sale

2. Drag-Along Rights: Optional section when option holder can force other shareholders to join the sale

3. Multiple Option Holders: Required when there are multiple option holders, specifying their respective rights and priorities

4. Tranched Exercise Provisions: When the option can be exercised in multiple tranches over time

5. Foreign Investment Compliance: Required when foreign investors are involved, addressing FEMA compliance

6. Tax Matters: Detailed tax provisions when specific tax structuring is required

7. Pre-emptive Rights: When existing shareholders are granted rights to purchase shares before the option is exercised

8. Board Nomination Rights: When option holder is granted board representation rights upon exercise

What schedules should be included in a Call Option Shareholders Agreement?

1. Schedule 1 - Company Information: Details of the company including incorporation, share capital, and existing shareholding

2. Schedule 2 - Option Shares: Detailed description of shares subject to the option including class and rights

3. Schedule 3 - Exercise Notice Format: Template for the option exercise notice

4. Schedule 4 - Deed of Adherence: Format for new shareholders to adhere to existing shareholders agreement

5. Schedule 5 - Completion Obligations: Detailed list of actions required at completion of option exercise

6. Schedule 6 - Warranties: Detailed warranties given by the parties

7. Appendix A - Board Resolution: Format of board resolution approving the option grant and share transfer

8. Appendix B - Valuation Methodology: Detailed methodology for determining option exercise price if not fixed

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

India

Cost

Free to use

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