Fundraising & Deal

Share Subscription Agreement (SSA)

Execute on stamp paper of the value prescribed in the State of execution. This agreement governs the subscription itself; the ongoing relationship between the shareholders is governed by the Shareholders’ Agreement executed alongside it.

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Share Subscription Agreement

Subscription to Compulsorily Convertible Preference Shares

THIS SHARE SUBSCRIPTION AGREEMENT is made at [PLACE] on [DATE]

BY AND AMONG:

(1)[COMPANY NAME], a private limited company incorporated under the Companies Act, 2013, bearing CIN [CIN], having its registered office at [ADDRESS] (the "Company");

(2)[FOUNDER 1], [particulars and PAN]; [FOUNDER 2], [particulars and PAN] (each a "Founder" and together the "Founders"); and

(3)[INVESTOR], [constitution, jurisdiction and address] (the "Investor").

The Company, the Founders and the Investor are together the "Parties".

Recitals

A.The Company carries on the business of [DESCRIBE] (the "Business").

B.The Founders are the promoters of the Company and hold the shares set out in Part A of Schedule 1.

C.The Investor has agreed to subscribe to, and the Company has agreed to issue and allot to the Investor, the Subscription Shares on the terms of this Agreement.

D.The Parties are entering into a shareholders’ agreement of even date (the "Shareholders’ Agreement") recording the terms governing their relationship as shareholders following Completion.

NOW THEREFORE the Parties agree as follows:

1. Definitions and Interpretation

1.1Capitalised terms not defined in this Agreement bear the meanings given in the Shareholders’ Agreement. In addition:

"Business Warranties" means the warranties in Part B of Schedule 3.

"Completion" means the completion of the subscription in accordance with Clause 4.

"Completion Date" means the date on which Completion occurs.

"Conditions Precedent" means the conditions in Schedule 2.

"Disclosure Letter" means the letter of even date from the Company and the Founders to the Investor, together with the documents attached to it.

"Fundamental Warranties" means the warranties in Part A of Schedule 3.

"Loss" means any loss, liability, damage, cost, charge, expense, claim, demand, fine, penalty, interest or tax, including reasonable legal and professional fees.

"Long Stop Date" means [DATE], or such later date as the Parties agree in writing.

"Material Adverse Effect" means any event, circumstance or change that has or would reasonably be expected to have a material adverse effect on the business, assets, financial condition, results or prospects of the Company, or on the ability of the Company or a Founder to perform this Agreement, excluding any effect arising from general economic conditions or from a change in law affecting the industry generally and not disproportionately affecting the Company.

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Notes for use

These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.

Section 42 is where private placements go wrong

Subscription money must be received into a separate bank account, must not be utilised before allotment and the filing of the return of allotment, must not be received in cash, and must be received from the bank account of the subscriber. Allotment must be made within sixty days of receipt; if it is not, the money must be repaid within fifteen days, failing which interest at twelve per cent per annum runs from the expiry of the sixty days. The offer must be made in Form PAS-4 to identified persons, and the return of allotment filed in Form PAS-3. These are not formalities — non-compliance carries penalties and is one of the first things the next round’s diligence will look for.

Valuation — two different reports

Section 62(1)(c) of the Companies Act, 2013 requires a valuation report from a registered valuer under Section 247 for a preferential allotment. Where the subscriber is a person resident outside India, the FEMA pricing floor separately requires a valuation certified by a chartered accountant, a SEBI-registered merchant banker or a practising cost accountant, under any internationally accepted pricing methodology on an arm’s length basis. These are different requirements with different qualified certifiers. Get both where both apply, and note that practice treats the FEMA certificate as stale after ninety days.

Angel tax has gone

Section 56(2)(viib) of the Income-tax Act, 1961 was omitted by the Finance (No. 2) Act, 2024 with effect from assessment year 2025-26 and has not been re-enacted in the Income-tax Act, 2025. There is no longer a tax charge on the Company for issuing at a premium above fair market value. Historical rounds remain assessable for open years, which is why the tax warranties and the tax indemnity period are drafted by reference to the assessment window rather than a fixed number of months.

Fair disclosure is the whole battle

Clause 6.3 defines fair disclosure and rejects data-room dumping. This single clause is worth more to an investor than any number of additional warranties, and is the clause founders most often give away without noticing. From the company side, the answer is not to resist the definition but to prepare a real disclosure letter: specific, cross-referenced to the warranty it qualifies, and delivered early enough to be negotiated.

No knowledge qualification for the investor

Clause 6.4 preserves warranty claims despite due diligence. Founders sometimes ask for the opposite — that anything the investor found in diligence cannot later be claimed. The compromise that usually works is to keep Clause 6.4 and to move the specific findings into Schedule 6 as agreed indemnities with agreed numbers, so both sides know where they stand.

Founder liability caps

A cap expressed as a percentage of the subscription amount, with fundamental and tax warranties carved out to the full amount, is the market position. Watch three things: whether the cap is per founder or in aggregate, whether liability is joint and several (it usually is, with an internal contribution arrangement as in Clause 8.6), and whether the founders have any realistic ability to pay. Where they do not, an escrow or a holdback of part of the subscription amount is the alternative, and should be negotiated openly.

Tranching cuts both ways

Milestone-based tranching gives the investor discipline and the company a lower headline dilution, but it also means the company is running on money it may not receive. Define the milestones objectively — revenue, users, a hire, a regulatory approval — not by reference to the investor’s satisfaction alone. Note also that for a non-resident investor each tranche is a separate allotment requiring its own valuation and its own FC-GPR filing.

Labour Codes in the employment warranties

Warranty B16 is deliberately drafted by reference to the substance of the obligations rather than by naming individual statutes, because the consolidated labour legislation altered the definition of wages, the treatment of overtime, and the timeline for full and final settlement. Confirm the position applicable in the State in which the Company operates, since State rules under the Codes were notified separately and the position is not uniform.

Data protection warranties will be diligenced

Warranties B20 to B22 track the Digital Personal Data Protection Act, 2023 and the rules made under it. The substantive obligations are being brought into force in phases, so a company may warrant compliance with obligations not yet fully operative. Draft the warranty by reference to obligations in force at Completion, and treat readiness for the remaining phases as a covenant rather than a warranty.

Interdependence at Completion

Clause 4.6 makes every Completion action interdependent. Without it, a company can receive the money and then fail to allot, leaving the investor as an unsecured creditor. With it, the investor can walk away cleanly. This is standard and should not be conceded.

Filings after Completion

PAS-3 for the return of allotment, MGT-14 for the special resolution, DIR-12 for the investor director, share certificates stamped within the prescribed period, and, for a non-resident investor, FC-GPR on the FIRMS portal within thirty days of allotment. Clause 4.5 puts a delivery obligation on the company so the investor sees the evidence rather than assuming it happened.

Stamp duty

Duty on this agreement is State-specific. Duty on the issue of securities is charged at the rate prescribed under the Indian Stamp Act, 1899 as amended, collected through the depository or the registrar and transfer agent where the securities are dematerialised, and payable by the company on physical certificates. Unstamped or understamped share certificates are a recurring diligence finding in later rounds.

Current as of

Reflects Indian law current as of {{DATE OF USE}}. Have this agreement, the disclosure letter and the schedules settled by counsel; the schedules are where the deal actually lives.

This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, company secretary, or chartered accountant as relevant) before you rely on it.