The Simple Equity Investment Agreement is a fundamental legal instrument used in Indian corporate transactions when an investor (either individual or institutional) seeks to acquire an equity stake in a company. This document is particularly crucial in the Indian business ecosystem, where it must comply with various regulations including the Companies Act 2013, SEBI guidelines, and when applicable, FEMA regulations for foreign investments. The agreement typically includes key elements such as investment terms, shareholding details, investor rights, governance provisions, and exit mechanisms. It's commonly used for both startup funding rounds and strategic investments in established companies, providing a structured framework that protects the interests of both investors and the company while ensuring regulatory compliance. The Simple Equity Investment Agreement serves as a cornerstone document that facilitates capital injection while establishing clear rights and obligations of all parties involved.
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1. Parties: Identifies the investor(s), the company, and any other relevant parties to the agreement
2. Background: Sets out the context of the investment and basic information about the company and its business
3. Definitions: Defines key terms used throughout the agreement
4. Investment Terms: Details the amount of investment, number and class of shares, price per share, and payment terms
5. Conditions Precedent: Lists conditions that must be satisfied before the investment is made
6. Completion: Specifies the closing process, including actions to be taken and documents to be delivered
7. Company Representations and Warranties: Statements of fact about the company's legal status, business, and financial condition
8. Investor Representations and Warranties: Statements of fact about the investor's capacity and authority to invest
9. Covenants: Ongoing obligations of the company and other parties post-investment
10. Reserved Matters: Lists decisions requiring investor approval
11. Exit Rights: Describes mechanisms for the investor to exit the investment
12. Confidentiality: Obligations regarding confidential information
13. Notices: Specifies how formal communications between parties should be made
14. Governing Law and Jurisdiction: Specifies Indian law as governing law and sets jurisdiction for disputes
15. General Provisions: Standard boilerplate clauses including amendments, waivers, and severability
1. Tag-Along Rights: Include when minority investor protection is needed, giving right to join in sale of majority shares
2. Drag-Along Rights: Include when majority shareholders need right to force minority to join in sale
3. Anti-Dilution Protection: Include for protecting investor against future down rounds
4. Board Nomination Rights: Include when investor is to have board representation
5. ROFR and ROFO: Include when parties want right of first refusal/offer on future share transfers
6. Non-Compete and Non-Solicit: Include when restrictions on founders/key employees are required
7. Foreign Investment Compliance: Include when investor is foreign entity, ensuring FEMA compliance
1. Schedule 1: Cap Table: Pre and post-investment shareholding pattern of the company
2. Schedule 2: Company Information: Detailed company information including corporate and financial details
3. Schedule 3: Conditions Precedent: Detailed list of conditions to be satisfied before investment
4. Schedule 4: Reserved Matters: Detailed list of matters requiring investor approval
5. Schedule 5: Warranties: Detailed warranties given by the company and founders
6. Schedule 6: Material Contracts: List of important contracts and agreements of the company
7. Appendix A: Form of Board Resolution: Template for board resolution approving the investment
8. Appendix B: Form of Shareholder Resolution: Template for shareholder resolution approving the investment
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