An SHA is a private contract between the shareholders of a company — it does not need to be filed with the RoC, but it must be consistent with the Articles of Association. Where the two documents conflict, the AoA generally prevails for matters of corporate governance. Drafting an SHA without simultaneously reviewing the AoA produces a document that is commercially agreed but legally unenforceable on key provisions.
We draft SHAs from scratch, review and negotiate SHAs proposed by investors' counsel, and advise founders on the implications of specific provisions before they commit.
Key Provisions in a Well-Drafted SHA
Founder Vesting
Standard market practice: 4-year vesting with a 1-year cliff. Defines what happens to unvested shares if a founder exits — good leaver vs bad leaver provisions, and buyback price mechanics.
Right of First Refusal (ROFR)
Existing shareholders (typically investors) have the right to purchase shares a founder or other shareholder proposes to sell, at the same price offered to a third party, before the external sale proceeds.
Anti-Dilution Protection
Investors in priced rounds typically negotiate anti-dilution rights. Broad-based weighted average anti-dilution is the market standard; full ratchet is heavily investor-favourable and should be understood before accepting.
Tag-Along Rights
If a majority shareholder sells their stake, minority investors have the right to sell their shares at the same price and on the same terms — preventing founder-only exits that leave investors behind.
Drag-Along Rights
If a specified supermajority (typically 75%+) wishes to sell the company, they can compel other shareholders to sell at the same price — enabling a clean acquisition without hold-out minorities.
Board Nomination Rights
Investors above a certain threshold typically get a right to nominate one or more directors. The SHA specifies the percentage trigger, the nomination process, and whether nominated directors have any veto rights.
Information Rights
Quarterly management accounts, annual audited accounts, and board meeting minutes — the information rights provisions define what investors receive and on what timeline.
Reserved Matters
Actions requiring investor approval beyond ordinary board or shareholder majority — new share issuances, related-party transactions, changes to business objects, or debt above a threshold.
SHA and AoA Consistency
In Indian company law, the Articles of Association is the supreme governance document. Where an SHA provision conflicts with the AoA — for example, a board nomination right in the SHA that the AoA does not permit — the AoA prevails. This means that provisions a founder and investor have agreed to in the SHA may be unenforceable unless the AoA is simultaneously amended to permit them.
We review and amend the AoA alongside every SHA we draft or review, ensuring that investor rights, founder vesting, ROFR, tag-along, and drag-along provisions are not only contractually agreed but also legally enforceable under the company's constitutional documents.
Our Approach
SHA Drafting from Scratch
Term-sheet-to-SHA conversion for angel and seed rounds. We draft the SHA reflecting the agreed commercial terms, with appropriate protective provisions for both founders and investors.
SHA Review and Negotiation Support
Where investor counsel proposes an SHA, we review it from the founders' perspective — identifying provisions that are non-market, one-sided, or inconsistent with the AoA, and advising on negotiation positions.
AoA Amendment
All SHA-linked governance provisions are mirrored into the AoA through an EGM special resolution — ensuring that investor rights are enforceable under company law, not just contract.
Consistency Across Documents
The SHA, AoA, ESOP scheme, and any existing inter-se agreements are reviewed together for consistency. Conflicts between documents are identified and resolved before the round closes.
What You Get
- SHA that reflects negotiated commercial terms and is consistent with the AoA
- AoA amended to make investor rights and governance provisions legally enforceable
- Founder vesting, ROFR, anti-dilution, tag-along, and drag-along provisions correctly structured
- Independent review of investor-proposed SHA — terms explained before founders sign
- Clean governance foundation for subsequent rounds and eventual exit