Shareholders Agreement & Cap Table

Almost every Indian startup that raises capital between FY 2026-27 and a Series B will go through three documents that decide whether the cap table holds together or collapses: the Founders Agreement, the Shareholders Agreement (SHA), and the Cap Table. The Founders Agreement governs the relationship between founders. The SHA governs the relationship between founders, ESOP holders, and outside investors after a round. The Cap Table is the spreadsheet that has to reconcile to both — and to the company's MOA / AOA, the share certificates, the ROC filings (PAS-3, MGT-7), the RBI FC-GPR for foreign investors, and the income-tax records.

Most early-stage startups land at their Series A diligence with a Cap Table that doesn't reconcile, an SHA missing material clauses, and founder vesting that was never properly reverse-vested. Investor counsel takes 20 minutes to spot it. The term sheet is then re-cut at a lower valuation, or worse, the round drags for months while corrections are made — by which time the dilution math has already moved against the founders. By 2026, the standard of investor counsel diligence has only sharpened, with portfolio managers running pre-DD checklists before they even invest the time to read a deck.

We draft SHAs and design Cap Tables that pass investor counsel review on first read. Our drafting integrates with the eventual Series A SHA, the ESOP plan, the IP assignment regime, and FDI / RBI compliance — so when the next round arrives, the cap table is reconciled and the legal package is investor-ready.

What an Investor-Grade SHA Actually Locks Down

• Equity, Vesting & ESOP Pool:: Founder vesting (4-year / 1-year cliff), ESOP pool sizing (10–15%), pre-money vs post-money pool dilution mechanics, accelerated vesting on change-of-control.

• Reserved Matters & Affirmative Voting:: Decisions requiring unanimous shareholder consent, investor consent, or board approval — drafted to avoid 50-50 deadlock and protect minority investors without crippling operations.

• Investor Protections:: Anti-dilution (broad-based weighted average vs full ratchet), pre-emption rights, ROFR / ROFO, tag-along, drag-along, liquidation preference (1x non-participating is the new market norm), redemption rights.

• Board Composition & Governance:: Founder seats, investor seats, observer rights, independent directors, board committees, quorum, decision protocols.

• Information Rights & Audit:: MIS, board pack, audited and management accounts, audit firm selection, inspection rights.

• Exit Mechanics & Waterfall:: IPO, M&A, secondary, buyback (Section 68 Companies Act), redemption — with explicit waterfall: liquidation preference first, then pro rata, with carve-outs for ESOP holders.

• Non-Compete, Confidentiality & Lock-In:: Founder lock-in until vesting / IPO, non-compete during and after, non-solicit, IP assignment refresh.

• Dispute Resolution & Boilerplate:: Arbitration seat (typically Mumbai / Delhi / Singapore), governing law, escalation, fees and costs.

Cap Table — The Document That Has to Match Everything

A clean Cap Table reconciles to: MOA / AOA, ROC filings (PAS-3, MGT-7), share certificates, FC-GPR (foreign investors), the company's bank statements showing capital infusion, the ESOP plan, the convertible notes / SAFE / CCD ledger, and the SHA's annexures. Every round, every ESOP grant, every transfer, every conversion must be reflected. Most cap tables maintained in Excel by founders break at one of these touch-points; we build cap tables in dedicated tools (Carta-like or equivalent) with version control and document linkage.

Why Templates Fail at Series A DD

Boilerplate SHA without reverse vesting on founders. Generic anti-dilution wording that gives investors more than the term sheet promised. ESOP pool that wasn't created via PAS-3. FC-GPR not filed for past foreign investment within 30 days. CCD ledger inconsistent with PAS-3. Each is a fixable issue at the time it happens; each is a re-priced round when surfaced at DD.