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Preferred Stock Agreement Template for India

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Preferred Stock Agreement

I need a Preferred Stock Agreement for my Series A investment round closing in March 2025, where we're issuing INR 50 crore worth of convertible preferred shares to a foreign venture capital firm with standard liquidation preference and board seat rights.

Document background
The Preferred Stock Agreement is a crucial document in Indian corporate finance, typically used when companies seek to raise capital while offering investors preferential rights over common stockholders. This agreement, governed by Indian law and compliant with the Companies Act, 2013, is particularly common in venture capital and private equity transactions. It meticulously details the preferences, rights, and protections granted to preferred stockholders, including dividend preferences, liquidation rights, conversion features, and voting rights. The document becomes essential when companies need to attract sophisticated investors while maintaining existing operational control, making it a fundamental tool in corporate fundraising and investment structuring.
Suggested Sections

1. Parties: Identifies the company issuing preferred stock and the preferred stockholder(s)

2. Background: Explains the context of the preferred stock issuance and the company's capital structure

3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes rules of interpretation

4. Issuance of Preferred Stock: Details the number, class, and par value of preferred shares being issued

5. Subscription Amount and Payment Terms: Specifies the price per share and payment mechanics

6. Dividend Rights: Establishes dividend preferences, rates, and payment terms

7. Liquidation Preferences: Details the preferential rights in case of liquidation or dis红杏直播

8. Conversion Rights: Specifies terms and conditions for converting preferred shares to common shares

9. Anti-dilution Protection: Provides protection against dilution from future stock issuances

10. Transfer Restrictions: Sets forth limitations on transfer of preferred shares

11. Representations and Warranties: Contains statements of fact and assurances from both parties

12. Covenants: Lists ongoing obligations of the company and shareholders

13. Events of Default: Defines circumstances constituting default and corresponding remedies

14. Term and Termination: Specifies duration and termination conditions of the agreement

15. Governing Law and Jurisdiction: Establishes applicable law and dispute re红杏直播 forum

16. Miscellaneous: Includes standard boilerplate provisions

Optional Sections

1. Board Representation Rights: Grants right to nominate directors to the company's board, included when preferred stockholders are given board seats

2. Preemptive Rights: Gives preferred stockholders right to maintain their ownership percentage in future offerings

3. Tag-Along Rights: Allows preferred stockholders to join in sale of shares by other shareholders

4. Drag-Along Rights: Enables majority shareholders to force minority holders to join in sale of company

5. Information Rights: Specifies financial and other information to be provided to preferred stockholders

6. Registration Rights: Included for companies planning to go public, gives rights to register shares for public sale

7. FEMA Compliance: Required when foreign investors are involved, ensures compliance with Indian foreign investment laws

8. Special Voting Rights: Details any special voting rights attached to preferred shares

Suggested Schedules

1. Schedule 1 - Share Certificate: Form of share certificate for preferred shares

2. Schedule 2 - Capitalization Table: Details of company's capital structure pre and post issuance

3. Schedule 3 - Company Information: Key corporate details including registration information and directors

4. Schedule 4 - Conversion Mechanics: Detailed procedures and formulas for share conversion

5. Schedule 5 - Corporate Authorizations: Copies of board and shareholder re红杏直播s approving the issuance

6. Schedule 6 - Disclosure Schedule: Exceptions to representations and warranties

7. Appendix A - Dividend Calculation Examples: Illustrative examples of dividend calculations

8. Appendix B - Anti-dilution Calculations: Examples and formulas for anti-dilution adjustments

Authors

Alex Denne

Head of Growth (Open Source Law) @ 红杏直播 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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Relevant Industries

Technology

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Education Technology

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Relevant Teams

Legal

Finance

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Compliance

Investment

Board of Directors

Corporate Secretarial

Risk Management

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Relevant Roles

Chief Executive Officer

Chief Financial Officer

General Counsel

Corporate Secretary

Investment Manager

Venture Capital Partner

Private Equity Director

Corporate Lawyer

Investment Banker

Finance Director

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Company Secretary

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